Sam Fletcher
Senior Writer
HOUSTON, July 8 -- The July 7 terrorist bomb blasts that killed at least 49 people and wounded hundreds more in London also blew energy futures prices off the record highs set in the previous trading session.
With the first news of the attacks, the August contract for benchmark US light, sweet crudes plummeted from an intraday high of $62.10/bbl to a low of $57.20/bbl before rebounding to $60.73/bbl, down just 55¢ for the day, on the New York Mercantile Exchange.
Some traders obviously feared that the terrorist attacks on three subway trains and a bus would trigger at least a general fear of travel, if not an economic downturn, that would affect global demand for energy. Crude prices fell 40% in the months following the Sept. 11, 2001, terrorist attacks on New York and Washington, DC.
However, Paul Horsnell, Barclays Capital Inc., London, reported July 8, "There are times when a market response should not be over-rationalized. That [July 7] response is typical of what a fairly febrile market can do when faced with a shock, and the sharp fall was a major overshooting. In our view, to have at the time put that response down to views on the likely impacts of global growth and oil demand would have been at best disingenuous."
Some said energy markets also were adversely affected by a large build in commercial US inventories of distillate fuel during the week ended July 1(OGJ Online, July 7, 2005).
Hurricane strengthens
Meanwhile, Hurricane Dennis, a powerful Category 4 storm with sustained winds of 150 mph, was still strengthening as it approached Cuba on July 8. Although forecasters expect the storm to weaken slightly after making landfall in Cuba, it still will be a major hurricane when it enters the Gulf of Mexico.
The National Hurricane Center in Miami, Fla., said the storm still threatens the US Gulf Coast from Florida to Louisiana.
The US Minerals Management Service said 81 offshore platforms and 35 rigs were evacuated ahead of the hurricane as of July 8. It said production of 220,326 b/d of oil and more than 1 bcfd of natural gas had been shut in. The MMS may close its Gulf of Mexico regional office in New Orleans on July 11 because of the storm, officials said. Meanwhile, it has activated a continuity of operations plan that involves opening a temporary office in Houston.
Other energy prices
The September contract for US crudes lost 45¢ to $61.68/bbl July 7 on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 55¢ to $60.74/bbl. Heating oil for August delivery lost 1.99¢ to $1.77/gal on NYMEX. However, gasoline for the same month continued climbing to a new record closing of $1.81/gal, up by 1.57¢ for the day.
The August natural gas contract plunged by 29¢ to $7.40/MMbtu, "hit by a steady stream" of profit taking after a 3-day run up in prices. Those holding open purchase positions that obligates the holder to take delivery on contracts "bailed on concerns that the storm track for Hurricane Dennis might be shifting east towards Florida and away from the natural gas platforms" in the central Gulf of Mexico, said analysts July 8 at Enerfax Daily.
In London, the August contract for North Sea Brent crude lost 57¢ to $59.28/bbl on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes inched up by 2¢ to $54.82/bbl on July 7.
Contact Sam Fletcher at [email protected]
