MARKET WATCH: Crude prices continue to explore new highs

Sam Fletcher
Senior Writer

HOUSTON, Sept. 20 -- The front-month crude futures contract climbed to new highs in the New York market Sept. 19 as US inventories continued to fall amid expectations that the interest rate cut by the Federal Reserve will boost energy demand.

The Fed cut its target interest rate by a larger-than-expected half of a percentage point to 4.75% this week to stem a possible slowdown in the US economy (OGJ Online, Sept. 19, 2007).

The Energy Information Administration reported commercial US crude inventories fell by 3.8 million bbl to 318.8 million bbl during the week ended Sept. 14. That was the 10th decline in crude stocks in 11 weeks. Although refinery utilization fell to 89.6% of capacity from 90.5% the previous week, gasoline stocks inched up by 400,000 bbl to 190.8 million bbl—still well below average. Distillate fuel inventories increased by 1.5 million bbl to 135.5 million bbl.

US refinery capacity was affected when three refineries in Port Arthur, Tex., lost power Sept. 13 as Hurricane Humberto hit the US Gulf Coast. Valero Energy Corp. said Sept. 19 its 250,000 b/d refinery's main processing units are operating and production has begun at reduced rates. "We expect the refinery to be at planned rates within several days," a company spokesman told OGJ Online.

Shell Oil Co. earlier said workers began the restart sequence after restoring power to most of Motiva Enterprises LLC's 285,000 b/d refinery. Total SA reported partial power was quickly restored to Total Petrochemicals USA's 231,252 b/d refinery (OGJ Online, Sept. 17, 2007).

Storm watch
The National Hurricane Center was sending out hurricane reconnaissance aircraft Sept. 20 to monitor a low-level low pressure system off the west coast of Fort Myers, Fla. "The system has the potential to turn into a tropical storm and further develop into a hurricane as early as this weekend," said analysts in the Houston office of Raymond James & Associates Inc.

The Minerals Management Service reported offshore oil and gas operators were evacuating platforms and rigs in the path of the potential storm. On Sept. 19 officials said 1 of the 834 manned platforms in US waters of the Gulf of Mexico had been evacuated, along with 1 of the 89 mobile rigs. Officials said no oil and gas production had yet been shut in.

Shell Oil Co. said it evacuated 600 workers from its offshore facilities Sept. 19, in addition to 300 removed Sept. 18. The company said Sept. 20 it had less than 400 workers still offshore and planned to evacuate them by the end of day. "The North Padre Island block 969 and West Cameron block 565 platforms have been fully evacuated. All remaining Shell operated production platforms have reduced crews to minimal levels to maintain production and those platforms will complete shut-in today and be fully evacuated. Shell operated production in the Gulf of Mexico is approximately 370,000 b/d of oil equivalent," said a company spokesman.

Hurricane Humberto's surprisingly rapid development earlier this month prompted some speculation that offshore producers would start earlier to bring workers ashore ahead of the next storm. However, a Shell representative told OGJ the current evacuation "is no earlier than we would initiate safe and orderly evacuations for a weather system under these conditions." She said, "While it is not a tropical storm or more at this point, you can't rule out the chance that it might develop, especially once in the gulf, and if we waited until that point to begin evacuations, it would strain lead time for safe and orderly evacuations and getting people out of potential harm's way."

If the current weather system develops into a tropical storm, several computer forecast models indicate it would move north-northwest across the northeast Gulf of Mexico, bringing heavy rain and gusty winds to the central Gulf Coast over the weekend. "While such a track would leave natural gas fields less exposed [to damage and disruption], there are still some refinery assets in Mississippi (Pascagoula), so we will not yet discount this weather risk for products. Furthermore, the calculated path and strength forecast will still undergo some changes as the front moves into the eastern US Gulf waters," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

In other news, Barclays Capital Inc. analyst Paul Horsnell in London said, "International tensions surrounding Iran appear to be in the process of stepping up, with diplomacy moving further away from the carrot and closer to the stick." He sees 2008 "as the year of maximum danger, although it does not appear that the core issues themselves, or the core dangers in the situation, would necessarily change following the change of US administration."

Horsnell said, "We are placing a partial allowance for the worst of any Iranian-linked tension in the second half of 2008, having nudged our 2008 West Texas Intermediate price forecast up to $77/bbl from the previous forecast of $73.90/bbl."

Energy prices
The October contract for benchmark US light, sweet crudes climbed to a record high of $82.51/bbl in intraday trade Sept. 19 on the New York Mercantile Exchange, prior to its record closing of $81.93/bbl, up 42¢ for the day. The November contract gained 62¢ to $80.85/bbl. On the US spot market, WTI at Cushing, Okla., was up 42¢ to $81.94/bbl. Midwest crude inventories at Cushing are now at the lowest level since December 2005, said Horsnell.

Heating oil for October delivery inched up 0.3¢ to $2.25/gal on NYMEX. The October contract for reformulated blendstock for oxygenate blending (RBOB) rose by 3.31¢ to $2.09/gal. Jakob said, "The refinery 3-2-1 margin has improved as heating oil has given up some of its premium to RBOB."

The October natural gas contract fell 38.8¢ to $6.18/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 7¢ to $6.28/MMbtu. Raymond James analysts said, "It continues to be our view, barring any prolonged shut-in activity in the gulf and heading into the end of injection season, that natural gas prices will need to continue to fall to spur a decrease in both US production and LNG imports or we will reach full storage this year."

EIA reported Sept. 20 the injection of 63 bcf of natural gas into US underground storage in the week ended Sept. 17. That compared with injections of 64 bcf the prior week and 93 bcf in the same period a year ago. US gas storage now exceeds 3.1 tcf, down 32 bcf from last year but 238 bcf above the 5-year average.

In London, the November IPE contract for North Sea Brent crude gained 88¢ to $78.47/bbl. Gas oil for October increased $6.75 to $704.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes was up 69¢ to $75.61/bbl on Sept. 19.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Petrobras starts up unit at Rnest refinery

03/13/2015 Petroleo Brasileiro SA (Petrobras) has initiated start-up of the second of two diesel hydrotreating units at its Abreu e Lima refinery (Rnest) at t...

USW, Shell reach tentative deal to end strike at US refineries

03/13/2015 Royal Dutch Shell PLC and the United Steelworkers union (USW) have reached a tentative bargaining agreement over pay, benefits, and health and safe...

Tillerson: Sound policies needed to buoy N. American energy revolution

03/13/2015 The US government needs to adjust its energy policies to ensure the country realizes all the benefits of the new era of energy abundance, said Rex ...

TAEP: Year of ‘dramatic contraction’ under way in Texas oil, gas employment

03/13/2015 The Texas Petro Index (TPI) dropped seven points to 299.6 during January compared with December, reflecting low crude oil prices, a falling rig cou...

Hazard seen behind North American rig upturn

03/13/2015 Wells not completed while oil prices are low might foreshorten recovery of North American drilling, even if the upturn arrives sooner than expected...

USGS: More data needed to grasp fracing’s water-quality risks

03/13/2015 More data and research will be necessary to better understand potential water-quality risks associated with US unconventional oil and gas resource ...

Afren reaches recapitalization agreement

03/13/2015 Afren PLC, London, has reached a recapitalization agreement with creditors that its interim managers say would, if approved by shareholders, preclu...

MARKET WATCH: NYMEX crude oil drops again on storage concerns

03/13/2015 Crude oil futures prices for April delivery on the New York market fell by more than $1/bbl to settle Mar. 12 at their lowest level since late Janu...

Perpetual Energy to sell West Edson for Tourmaline stock

03/13/2015 Perpetual Energy Inc., Calgary, has signed a definitive agreement to sell its joint interest share of West Edson in west-central Alberta to Tourmal...
White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

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