MARKET WATCH: Hurricane Irene inflicts no damage on energy markets

Despite the pre-storm hype by government officials and national media concentrated along the East Coast, Hurricane Irene proved a fizzle rather than ferocious, with virtually no impact on energy prices, with crude up 2% Aug. 29 in the New York market on optimism for the economy and oil demand.

Most petroleum processing and distribution facilities on the eastern seaboard came back online almost immediately as the expected storm damage and disruption failed to materialize over the weekend. “Magellan Midstream Partners still has two facilities in Wilmington, Del., and New Haven, Conn., closed pending further inspection. No updates have been released for the Providence NGL terminal for Enterprise Products Partners, and Kinder Morgan Partners' petroleum terminal in Carteret, NJ, remains closed pending further inspection,” reported analysts in the Houston office of Raymond James & Associates Inc. on Aug. 30. “In summary, it remains business as usual for these partnerships, with procedural inspections to bring these facilities back online.”

While the mayor of New York fretted about a possible storm surge up the city’s East River, the only surge witnessed by Wall Street was in the Standard & Poor’s 500 Index performance, reported Olivier Jakob at Petromatrix in Zug, Switzerland.

“Historical volatility in the S&P 500 remains extremely high, and with the current high correlations between crude oil prices and the S&P 500, it is difficult in any day void of significant oil inputs for oil prices to ignore the price swings in equity. However, with a UK summer bank holiday yesterday and Irene keeping some traders at home or traveling to the beach mansion to check for damages, the volume traded in oil was extremely low, and that makes it harder to read yesterday’s price evolution,” he said.

Raymond James analysts, however, said natural gas prices fell more than 2% as post-hurricane power outages curbed demand and forecasts called for milder weather.

Meanwhile, Reuters news service reported an oil tank on fire at the Es-Sider oil export terminal, Libya's largest, which loaded 450,000 b/d prior to the uprising against dictator Moammar Gadhafi. One official was quoted as saying the terminal—controlled by the Waha Oil Co. joint venture under ConocoPhillips, Marathon Oil Corp., and Hess Corp.—was damaged by gunfire days ago. A second damaged tank at the Brega export terminal was reported smoldering.

Jakob said, “The main global input yesterday was a stronger-than-expected increase in US consumer spending, up 0.8% in July compared with a negative 0.1% in June. The other side of the coin, however, is that real disposable income dropped by 0.1% compared with [a gain of] 0.3% in June. We continue to believe that the high prices for gasoline and distillates will continue to challenge real disposable income and economic growth. Irene being a no-show, the reformulated blend stock for oxygenate blending (RBOB) gasoline crack to Brent suffered yesterday and if more losses are printed on the gasoline crack, we will start to enter the zone where US refinery margins will be negatively impacted.”

Energy prices

The October contract for benchmark US sweet, light crudes climbed $1.90 to $87.27/bbl Aug. 29 on the New York Mercantile Exchange. The November contract increased $1.87 to $87.27/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.90 to $87.27/bbl.

Heating oil for September delivery barely advanced 0.01¢, closing essentially unchanged at a rounded $3.01/gal on NYMEX. RBOB for the same month declined 2.82¢ to $2.91/gal.

The September contract for natural gas fell 7.4¢ to $3.86/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 7.2¢ to $3.92/MMbtu.

In London, the October IPE contract for North Sea Brent advanced 52¢ to $111.88/bbl. Gas oil for September gained $13.75 to $963.75/tonne.

The Organization of Petroleum Exporting Countries offices in Vienna are closed Aug. 30-31 for a religious holiday with no update on the average price for the group’s basket of 12 benchmark crudes.

Contact Sam Fletcher at samf@ogjonline.com.

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