MARKET WATCH: Declining demand pulls down energy prices
Sam Fletcher
Senior Writer
HOUSTON, Aug. 18 -- Energy prices continued to fall Aug. 15 as the Organization of Petroleum Exporting Countries reduced its 2008 estimate of the growth rate of world demand for crude to 1 million b/d, down 30,000 b/d from its previous forecast in July.
OPEC maintained its estimate of the 2009 demand growth rate at 900,000 b/d, but said countries outside of the Organization for Economic Cooperation and Development would account for all the world oil demand growth next year. "Due to a major slowdown in transport and industrial fuel consumption not only in North America but also in OECD Europe and Pacific, oil demand growth will be on the decline [in those areas] in 2009, which will make the world oil demand growth the lowest since 2002," said OPEC officials.
"Gasoline, the engine of the US oil demand, has been on the decline since the beginning of the year. Summer strong oil demand growth in China, Middle East, and Asia has not been enough to offset the huge decline in OECD oil demand in the second quarter," they said.
The price of OPEC's basket of 13 benchmark crudes peaked at $140.73/bbl on July 4, due to geopolitical tensions and weakness of the US dollar. However, signs of a weakening economy, especially in the US, caused that price to fall by $13.55/bbl, or almost 10%, through July. By the second week of August, OPEC's basket price had plunged more than $31/bbl, hitting a 3-month low of $109.08/bbl on Aug. 12.
In the New York market, crude futures prices fell in 8 of the 10 trading sessions through Aug. 15. Meanwhile, the value of the US dollar hit a 6-month high against the euro.
In other news, Tropical Storm Fay, the sixth named storm of the 2008 Atlantic hurricane season, formed Aug. 15 out of a tropical system just north of the Lesser Antilles.
Shell Oil Co. in Houston implemented precautionary plans Aug. 16-17 by evacuating 400 nonessential workers—200 on Aug. 16 and another 200 on Aug. 17—from its east operations area in the Gulf of Mexico. On Aug. 17, the company reported, "There remains no impact to Shell-operated production at this time."
Energy prices
After falling earlier in the session to an intraday low of $111.34/bbl Aug. 15, the September contract for benchmark US sweet, light crudes staged a last minute rally to close at $113.77/bbl, down $1.24 for the day on the New York Mercantile Exchange. The October contract lost $1.09 to $113.94/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.23 to $113.77/bbl. Heating oil for September delivery gained 2¢ to $3.12/gal on NYMEX. The September contract for reformulated blend stock for oxygenate blending (RBOB) dropped 5.18¢ to $2.86/gal.
The September natural gas contract lost 4.4¢ to $8.09/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 35¢ to $7.82/MMbtu.
In London, the October IPE contract for North Sea Brent declined by $1.13 to $112.55/bbl. The September contract for gas oil dropped $25 to $991.25/tonne. It marked the first time in many weeks that the front-month gas oil contract has traded below the $1,000 level.
The average price for OPEC's basket of 13 reference crudes fell $3 to $107.88/bbl on Aug. 15.
Contact Sam Fletcher at [email protected].