MARKET WATCH
Crude futures price gain ends 5-day fall on NYMEX

Sam Fletcher
Senior Writer

HOUSTON, Oct. 10 -- With the start of the Northern Hemisphere heating season less than 4 weeks away and the Gulf of Mexico still slow to recover oil and natural gas production, crude futures prices increased slightly Oct. 7 after a 5-day losing streak.

The US Minerals Management Service reported Oct. 7 that crews evacuated ahead of hurricanes in September and October still had not returned to 6 drilling rigs and 274 platforms in the gulf. Shut-in production now totals 1.2 million b/d of oil, or 77.5% of normal output, and 6.4 bcfd of gas, or 64.4% of the usual production from those waters. Total Gulf of Mexico production lost since Aug. 26 through Oct. 7 totaled 50.1 million bbl of crude and 246.5 bcf of natural gas.

Other production losses
In its ongoing survey of the status of producing wells in 38 parishes in the southern portion of the state, the Louisiana Office of Conservation said 535.7 MMcfd of gas production from onshore or in state waters has been restored, while 42.9% of the wells in that area were still shut in as of Oct. 7. However, the state agency has not yet received information on 38.5% of the oil and gas wells in that region. Daily gas production capacity of the 38 parishes is estimated at 2.2 bcfd, based on average production for January-May.

The US Department of Energy said Oct. 7 that 20 gas processing plants with capacities equal to or greater than 100 MMcfd are still inactive. A number of plants with a combined capacity of 4.76 bcfd "are operational but are not active, owing to upstream or downstream infrastructure [problems] or supplies being unavailable," DOE officials said. "These plants had flowed 2.29 bcfd before the hurricanes." A number of inactive plants are expected to be operating within 4 weeks, the officials said.

Because of higher-than-expected production volumes shut in by Hurricanes Rita and Katrina, Banc of America Securities LLC, New York, said Oct. 10 it raised its fourth quarter forecast for composite spot natural as prices to $12/MMbtu from $10/MMbtu.

DOE said eight Gulf Coast refineries were still shut down Oct. 7, including five idled by Rita and three knocked out by Katrina: a total of 2.1 million b/d of refining capacity offline. That amounts to 900,000 b/d of gasoline, 500,000 b/d of distillate fuel, and 200,000 b/d of jet fuel not being produced, said DOE officials.

Full commercial power has been restored at the Trunkline LNG facility at Lake Charles, La., and the terminal is now operating at normal levels with full regasification and send-out. The Henry Hub pipeline center in Louisiana resumed limited operation without compressors.

Energy prices
The November contract for benchmark US light, sweet crudes gained 48¢ to $61.84/bbl Oct. 7 on the New York Mercantile Exchange, while the December contract increased by 56¢ to $61.62/bbl. Heating oil for November delivery was up by 0.94¢ to $1.96/gal on NYMEX. However, gasoline for the same month fell by 1.13¢ to $1.83/gal. The November natural gas contract continued to fall, down by 14.9¢ to $13.23/MMbtu "on a weaker cash [spot gas] market, milder weather, and follow-through technical selling after Thursday's steep slide," said analysts at Enerfax Daily. "Technical traders say the lower price action that started Wednesday [Oct. 5] may have signaled a downside reversal," they said, after the November gas futures contract earlier hit a record high.

In London, the November contract for North Sea Brent crude jumped by 84¢ to $59.21/bbl on the International Petroleum Exchange. October gas oil rose by $2.25 to $595/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes lost 55¢ to $53.72/bbl Oct. 7. The OPEC basket price has averaged $50.10/bbl so far this year.

Contact Sam Fletcher at samf@ogjonline.com.

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