Energy prices retreat in profit-taking

Sam Fletcher
Senior Writer

HOUSTON, Oct. 3 -- Energy futures prices retreated in profit-taking Sept. 30, albeit to still high levels as traders continued to worry about possible supply shortages this winter.

Robert S. Morris at Banc of America Securities LLC, New York, said: "While uncertainties regarding the resumption of both Gulf [of Mexico] production and refining operations underscored the rise in oil prices during the first half of [last] week, concerns about demand destruction along with an unexpected build in US gasoline inventories, due largely to a nearly 30% rise in gasoline imports along with a drop in gasoline demand, weighed on oil prices as the week wrapped up. The back-to-back impact of Hurricanes Katrina and Rita have left around 20% of US refining capacity, or nearly 2 million b/d, offline, while nearly 1.5 million b/d of offshore gulf production (not including state water and onshore volumes) remains shut in."

The rise in natural gas prices continued to outpace that of oil prices because of the hurricanes' potentially greater impact on gas supplies from the gulf, said Morris in an Oct. 3 report.

The US Minerals Management Service said 471 offshore platforms and 33 drilling rigs in the gulf remained without crews Sept. 30. MMS reported 1.5 million b/d of crude and 7.9 bcfd of natural gas are still shut in, which amounts respectively to 97.8% and 79.4% of normal production from the gulf. Cumulative lost production from the Gulf of Mexico since Aug. 26 totaled 40.8 million bbl of crude and 196.5 bcf of gas.

"However, we believe that total shut-in volumes were underestimated given that production in state waters and onshore along the Gulf Coast are not included in the MMS data, which is the only cumulative data available on shut-ins even though several companies have noted they shut in onshore volumes," said Morris. "Thus, it is still difficult to assess the real level of 'backed-out' demand [for natural gas] at this juncture."

Rigs damaged
Meanwhile, the industry is still assessing storm damage to Gulf Coast oil and gas infrastructure. MMS officials said 35 offshore platforms were destroyed by Hurricane Rita, while 16 more sustained extensive damage. It said 13 rigs went adrift, with 6 becoming grounded and 9 reporting other problems.

"Hurricane Rita proved to be even more destructive than Katrina for drilling rigs," said Angeline M. Sedita, senior vice-president of oil service equity research at Lehman Bros. Inc., New York.

Two of Diamond Offshore Drilling Inc.'s semisubmersible rigs, the Ocean Saratoga and the Ocean Star, broke free from their moorings during the storm and grounded in 35 ft of water 100 miles from their original positions. "Both rigs will see some downtime for repairs but will return to service in the fourth quarter," said Sedita.

Ensco International Inc. sustained minor damage to three rigs. "The drill floor of the ENSCO 68 shifted, the ENSCO 69 skid-off drilling package also shifted on the oil company platform, and the ENSCO 90 is not trim," Sedita said.

GlobalSantaFe Corp. reported severe damage to two jack up rigs, the GSF Adriatic VII and the GSF High Island III. "It is likely these two rigs will be considered total losses," predicted Sedita.

A Nabors Industries Ltd. deep drilling barge, Rig 300, sustained water damage to the electrical, power, mud pump, and other systems that will take weeks to repair. The control systems and quarters of the firm's Dolphin 111 jack up suffered water damage, while the mast of another jack up, Rig 54, was blown over, Sedita reported.

Noble Corp.'s Noble Max Smith semisubmersible drifted 123 miles from its prestorm location and had a hole punctured on its starboard outboard column. The submersible Noble Joe Alford's support members below the hull "were either bent or broken." Three other submersibles, the Noble Therald Martin, Noble Paul Romano, and Noble Amos Runner drifted many miles from their original locations during the hurricane, while the Noble Lorris Bouzigard broke at least one of its mooring lines and shifted from its prestorm location. "All of the rigs will require some shipyard time," said Sedita.

Three of Rowan Cos. Inc.'s jack up rigs, the Rowan-Odessa, the Rowan-Halifax, and the Rowan-Fort Worth, were not found at their prestorm locations and may be declared total losses. The hull of another jack up, the Rowan-Louisiana, broke away from its legs and ran aground off Louisiana. But it may be repaired within 6-9 months, Sedita said.

Transocean Inc.'s Transocean Marianas semisubmersible rig sustained damage to its mooring system and drifted 140 miles northwest of its original location. The semisubmersible Deepwater Nautilus went adrift as a result of a towline break and had to use its thrusters to move to a safe location.

Sedita reported, "The rigs are covered by insurance; however, the amount of coverage varies fairly dramatically. In total, Katrina will likely end up claiming two jack ups, and Rita, another four to five jack ups."

Energy prices
The November contract for benchmark US light, sweet crudes dropped 55¢ to $66.24/bbl Sept. 30 on the New York Mercantile Exchange. The December contract dipped by 6¢ to $66.23/bbl. Gasoline for October delivery plunged by 11.35¢ to $2.14/gal on NYMEX, while heating oil for the same month lost 5.74¢ to $2.07/gal. The November natural gas contract plummeted by 27.5¢ to $13.92/MMbtu.

In London, the November contract for North Sea Brent crude fell by 36¢ to $63.48/bbl on the International Petroleum Exchange. The October gas oil contract lost $2.50 to $626.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes declined by 15¢ to $58.02/bbl on Sept. 30. So far this year, OPEC's basket price has averaged $49.94/bbl.

Contact Sam Fletcher at

Related Articles

US Forest Service takes no stance on fracturing in national forest


The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Weak crude prices could threaten Bakken production growth

12/12/2014 Bakken shale production set another record in August, but weakening crude prices and flaring reduction efforts threatened to temper production grow...

BHI: US rig count forced down by large losses in Texas

12/12/2014 Forced down by large losses in Texas and specifically the Permian basin, the US drilling rig count plummeted 27 units to settle at 1,893 rigs worki...

Husky reports start of steam operations at Sunrise oil sands project


Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

Independent assessment hikes Husky heavy oil resources

12/12/2014 Husky Energy Inc., Calgary, says an independent assessment increases its heavy oil resources in the Lloydminster region of Alberta and Saskatchewan.

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Stone drills successful Utica exploration well

12/10/2014 Stone Energy Corp., Lafayette, La., reported that its Pribble 6HU well in Wetzel County, W.Va., flowed from a 3,605-ft lateral at 30 MMcfd during t...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts

On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.



Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.


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