MARKET WATCH
Crude futures prices continue to climb

Sam Fletcher
Senior Writer
HOUSTON, Oct.13 -- Crude futures prices continued to climb Oct. 12 on predictions that growth of world oil demand will increase next year.

The Paris-based International Energy Agency also predicted world oil demand growth would rebound by 1.75 million b/d in 2006, up from growth of 1.26 million b/d in 2005 (OGJ Online, Oct. 12, 2005).

The US Energy Information Administration lowered its 2005 oil demand forecast by 290,000 b/d to 20.5 million b/d because of consumer reaction to high fuel prices caused by production disruptions in the wake of two hurricanes. But that price-driven demand decline will be only temporary, officials said. EIA increased its 2006 projection of US demand by 500,000 b/d, or 2.2%, to 21 million b/d.

Heating costs
In its October Short-Term Energy Outlook issued Oct. 12, EIA said US households can expect higher heating bills this winter because of hurricane disruptions of Gulf Coast production and processing. On average, households using natural gas for heating can expect to spend $350 (48%) more this winter, while those using heating oil will pay $378 (32%) more.

Propane heating will cost $325 (30%) more this winter, said EIA, while households relying on electrical heating can expect to pay $38 (5%) more. Fuel expenditures are dependent on local weather conditions, the size and efficiency of individual homes and their heating equipment, and thermostat settings, officials said.

Hurricane update
The US Minerals Management Service said 256 offshore platforms and 3 drilling rigs in the Gulf of Mexico still were without crews as of Oct. 12. More than 1 million b/d of oil production, 69.8% of the gulf's normal output, remains shut in, as does 5.9 bcfd, or 59.2%, of natural gas production. Cumulative gulf production lost since Aug. 26 now stands at 55.6 million bbl of crude and 277.5 bcf of natural gas.

The Louisiana Office of Conservation said 686.8 MMcfd of natural gas production from onshore fields and in state waters in 38 southern parishes had been restored. That represents 21.2% of the previous production from that region. Meanwhile 2,756 wells, 46.3% of those in that area, remain shut in. Officials said they still have received no reports on the status of 32.6% of the oil and gas wells in that area.

The Department of Energy reported 15 natural gas processing plants in Louisiana with an aggregate capacity of 9.51 bcfd remain shut in. Officials said a number of plants with a total capacity of 1.85 bcfd are operational but inactive because of upstream or downstream infrastructure problems or unavailable supplies.

DOE said a unit of Williams Cos. is holding an expedited open season for up to 250 MMcfd of transportation service on the Discovery pipeline system to provide an outlet for gas currently shut-in because of damage to third-party facilities during Hurricane Katrina. Discovery pipeline received approval from the Federal Energy Regulatory Commission to construct a new receipt point at Texas Eastern Transmission's Larose compressor station in Lafourche Parish, La. The proposed in-service date is scheduled for mid-November.

EIA said Oct. 13 that commercial US crude inventories increased by 1 million bbl to 306.4 million bbl the week ended Oct. 7. Gasoline stocks fell by 2.7 million bbl to 192.8 million bbl in that same period, below the lower end of the average range for this time of year. Distillate fuel inventories dropped by 3.4 million bbl to 124.6 million bbl, in the lower half of the average range.

Imports of crude into the US increased by 500,000 b/d to more than 8.6 million b/d during that period. Input of crude into US refineries gained by 868,000 b/d to nearly 12.6 million b/d as some storm-damaged Gulf Coast refineries resumed operations. The US refining system operated at 74.9% of capacity in the latest week.

Energy prices
The November contract for benchmark US sweet, light crudes gained 59¢ to $64.12/bbl Oct. 12 on the New York Mercantile Exchange, while the December contract advanced by 56¢ to $63.61/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased by 59¢ to $64.13/bbl.

Gasoline for November delivery dipped by 0.56¢ to $1.828/gal on NYMEX. Heating oil for the same month slipped by 0.22¢ to $2.016/gal. The November natural gas contract edged up by 0.5¢ to $13.52/MMbtu.

In London, the November contract for North Sea Brent crude increased by 49¢ to $60.57/bbl on the International Petroleum Exchange. Gas oil for October was unchanged at $604.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 90¢ to $55.37/bbl on Oct. 12.

Contact Sam Fletcher at samf@ogjonline.com

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