Oil price sets records; gas up sharply

Sam Fletcher
Senior Writer

The September contract for benchmark US sweet, light crudes set records for the top intraday trading and closing prices, while natural gas for the same month soared to a 9-month high during the first week of August.

The Aug. 1 death of Saudi Arabia's King Fahd bin Abdul Aziz initially drove crude futures prices to new highs, despite the smooth succession of Crown Prince Abdullah bin Abdulaziz al-Saud to the throne. But energy prices continued to escalate amid concerns about the industry's ability to meet growing energy demand in the fourth quarter and into 2006, especially with several recent refinery problems in the US. "Although crude oil prices have averaged nearly $50/bbl over the past year, global demand, and the US economy in particular, have remained quite resilient," said Robert S. Morris, Banc of America Securities, New York.

The September crude contract shot up to a record of $62.30/bbl in intraday trading on the New York Mercantile Exchange immediately following Fahd's death. It settled at $61.57/bbl on Aug. 1, up by $1 for the day and the highest closing for a front-month contract in the 22 years NYMEX has traded crude futures. Energy prices continued to climb Aug. 2, with September crude futures finishing at a new high of $61.89/bbl on traders' expectations of a continued falloff in US crude inventories.

However, the Energy Information Administration said Aug. 3 that commercial US crude stocks rose for the first time in 5 weeks, up by 200,000 bbl to 318 million bbl during the week ended July 29. Distillate fuel inventories were up by 1.5 million bbl to 127.3 million bbl during the same period, with a sharp increase in diesel fuel more than compensating for a decline in heating oil. Gasoline stocks plunged by 4 million bbl to 205.2 million bbl, indicating continued strong demand.

The September crude price then dropped to $60.86/bbl on NYMEX, but not before hitting an intraday price record of $62.50/bbl. However, it sagged to $61.38/bbl on Aug. 4, as natural gas for September delivery escalated to $8.69/MMbtu during trading before pulling back to $8.47/MMbtu, the highest closing price since last November for a front-month contract and up by 12¢ for the day. Both contracts continued to climb Aug. 5 to new highs of $62.31/bbl for crude and $8.70/MMbtu for natural gas.

Summer heat and humidity across much of the nation created more demand for air conditioning and for natural gas to fuel electric generators. Power grid operators from the Midwest to the Mid-Atlantic reported electricity demand on Aug. 3 exceeded the record high levels recorded the previous week.

Opposite outlooks
In an Aug. 3 report, Paul Horsnell with Barclays Capital Inc. in London said he expects crude prices soon will test $65/bbl in the New York futures market. He noted that it was impossible at that time to buy futures contracts for benchmark US sweet, light crudes "for less than $60/bbl for any delivery date" through December 2011 on NYMEX. "Every 2006 delivery month is currently trading above $64, and a few months have already showed their head above $65. Further, the move up still has some impetus," he said.

Even with members of the Organization of Petroleum Exporting Countries producing at 25-year highs in a struggle to meet world demand, crude prices have increased by 40% this year.

"The oil system, both upstream and downstream, is being run close to sustainable limits, and the tensions created by the absence of slack are now the key driver of prices," Horsnell said. "The profusion of recent snags in the US refining system even suggests that, over time, the system is being pushed beyond its sustainable limits and, hence, that interruptions are becoming more likely."

However, analysts at Strategic Energy & Economic Research Inc. in Winchester, Mass., earlier reported, "Evidence is mounting that this year will see a significant drop in the level of demand growth. Previously, most forecasters projected that demand would grow by 1.5-2 million b/d this year, depending on their bullishness, but now it appears that the low end is the most likely—and may prove too optimistic."

SEER analysts noted, "Chinese demand growth has been quite anemic in the past 6 months, and expectations of higher growth in the second half of this year are based on assumptions which remain untested."

They said, "Fears that OPEC will be unable to meet fourth quarter demand rest heavily on bullish assumptions about both demand and non-OPEC supply and appear very unlikely to materialize."

(Online Aug. 8, 2005; author's e-mail: samf@ogjonline.com)


Related Articles

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

OxyChem-Mexichem JV lets contract for ethylene storage

06/30/2015 Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has let a contract to CB&am...

Survey begins of collaboration on the UKCS

06/30/2015

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

MARKET WATCH: NYMEX, Brent crude oil prices slump on Greek default fears

06/30/2015 US light, sweet crude oil futures and Brent crude oil futures for August delivery each settled down by more than $1/bbl on June 29, with Brent slid...

RIL’s Jamnagar refinery due maintenance

06/29/2015 Reliance Industries Ltd. (RIL), Mumbai, is planning to shut down a crude unit for scheduled maintenance at its 1.24 million-b/d Jamnagar refining a...

Group suggests principles for Alberta royalty review

06/29/2015 The Canadian Association of Petroleum Producers (CAPP) has suggested that four principles guide Alberta in an oil and gas royalty review planned by...

MARKET WATCH: NYMEX crude oil for August hovers below $60/bbl

06/29/2015 US crude oil futures for August delivery settled below $60/bbl on the New York market June 26 as tensions mounted about Greece, which ordered lende...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected