MARKET WATCH
Prudhoe Bay disruption pushes up energy prices

Sam Fletcher
Senior Writer

HOUSTON, Aug. 7 -- Energy prices retreated below $75/bbl on Aug. 4 as Tropical Storm Chris dissipated in the Caribbean, then spiked above $76/bbl Aug. 7 in overnight electronic trading after BP PLC began shutting in 400,000 b/d of crude production from Prudhoe Bay over the weekend because of a pipeline leak.

BP Exploration Alaska Inc. said workers on Aug. 6 found a small spill of 4-5 bbl of crude from a transit line connecting that field to the Trans-Alaska Pipeline System (TAPS). That spill has been contained and is being cleaned up, but workers are shutting down the transit line to the nation's largest oil field in order to assess and repair the corrosion that caused the spill. The company has given no indication of how long the field may be shut in.

Some crude is still moving through the Alyeska Pipeline to loading terminals in Valdez. That pipeline delivered an average 891,104 b/d of crude to that terminal in 2005.

Disruption of Alaska North Slope production previously was not among the major concerns plaguing world oil markets as traders concentrated on the threat of hurricanes in the Gulf of Mexico and violence in the Middle East.

In an Aug. 7 report, Standard & Poor's Ratings Services examined four different scenarios of how crude prices may be affected by developments in the Middle East.

If the current fighting subsides without spreading to Syria or Iran, oil prices could subside to $70/bbl by yearend, said S&P's analysts. According to their second scenario, they said: "The conflict spreads to Iran, perhaps because of air strikes by Israel or the US on nuclear or other facilities. Iran stops exporting oil. However, the Strait of Hormuz, through which most Persian Gulf oil flows, remains open, and Arab states continue to export." Energy prices still would move higher, however.

The third scenario is similar to the second, "except that Iran partially closes the Strait of Hormuz." S&P analysts said, "Most Persian Gulf oil shipments are shut down for a period of 6 months before the vital shipping lane reopens." That would push energy prices higher still.

In their fourth scenario, S&P analysts said: "The Persian Gulf countries join in a selective embargo of the US, refusing to export oil to the world's biggest energy consumer but continuing to supply it at similar volume to Asia, Europe, and other oil-importing regions. Venezuela cooperates with the Arab embargo." That would drive up energy prices in the US but not necessarily in the rest of the world.

"Worse cases than any of these are entirely possible, with resulting impacts on the US and world economy that are nearly impossible to model. The best hope is for a diplomatic breakthrough—and a little luck—to help limit the outcome to the first scenario," said David Wyss, S&P chief economist.

In a separate Aug. 7 report, analysts in the Houston office of Raymond James & Associates Inc. said: "Over the weekend, Middle East fighting intensified amid stronger-than-expected resiliency from Hezbollah guerillas. A US-French proposed resolution to end the fighting will be submitted to voting at the UN Security Council early this week.

"On the Iranian front, Tehran has vowed to pursue the country's nuclear program, ignoring last week's [United Nation] resolution urging it to curb nuclear activities. As tensions rise, the Iranian issue is set to take center stage in the upcoming weeks and may fuel higher oil prices. In the natural gas markets, prices may fall on forecasts that the hurricane season will not be as severe as initially predicted, easing concerns that Gulf of Mexico production will be disrupted."

Energy prices
The September contract for benchmark US light, sweet crudes retreated by 70¢ to $74.76/bbl Aug. 4 on the New York Mercantile Exchange. But it bounced back to $76.55/bbl in electronic trading before that market reopened. The October contract was down by 58¢ to $76.16/bbl on Aug. 4. Gasoline for September delivery fell by 6.19¢ to $2.23/gal with no storms threatening Gulf Coast refineries at the end of last week. Heating oil for the same month lost 2.39¢ to $2.09/gal. The September gas contract slipped by 4.6¢ to $7.25/MMbtu.

In London, the September IPE contract for North Sea Brent crude lost 39¢ to $76.17/bbl. However, the August contract for gas oil increased by $4.25 to $652.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes inched up by 1¢ to $71.09/bbl on Aug. 4. So far this year, OPEC's basket price has averaged $62.51/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

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 ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

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...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

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
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

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


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