The front-month crude contract rebound Aug. 31 from a 2-day price decline on the New York market ahead of the Labor Day weekend that marked the end of peak summer driving in the US. Natural gas continued its climb.
Analysts in the Houston office of Raymond James & Associates Inc. reported gas supply growth is likely to decline in 2013 while oil supplies continue to increase.
“After some fine tuning and marking-to-market the rig count, we're lowering our gas growth forecast for 2013 from 2 bcfd to 500 Mcfd,” RJA analysts said. “In fact, even though we've dropped 440 gas rigs since last October, supply is not expected to decline until 2015 thanks to the trifecta of uncompleted well inventories, associated gas production, and efficiencies.”
As for oil, RJA said, “Onshore production has remained robust, up 800,000 b/d year-over-year in the second quarter. On the other hand, the Gulf of Mexico was a drag on growth in the second quarter and will be again in the third quarter due to the shutdowns related to Hurricane Isaac. Accordingly, we've tweaked our assumptions for the gulf, in addition to updating our production-by-play estimates. We are now forecasting full-year 2012 and 2013 oil production of 6.394 million b/d (736,000 b/d of growth) and 7.246 million b/d (852,000 b/d of growth). The full-year forecasts for 2012 and 2013 are down a modest 53,000 b/d and 29,000 b/d, respectively, from our prior forecast.”
AS of Sept. 3, the Bureau of Safety and Environmental Enforcement reported workers had not yet returned to 71 of the 596 manned platforms and 6 of the 76 rigs in the gulf that were evacuated ahead of Isaac. Federal officials estimated 58.29% of daily oil production and 38.62% of daily gas production in the gulf remained shut in. No severe damage to the oil and gas infrastructure offshore or along the Gulf Coast has been reported.
Meanwhile, markets continue to evaluate mixed economic indicators. The Commerce Department reported Sept. 4 total US construction spending fell in July by the largest amount this year. Officials attributed that decline to a drop in home improvement spending but said construction of single-family houses and apartments continued modest recovery.
Europe’s economy continued to deteriorate with benchmark indexes down 1.2% in Germany, 1.3% in France, and 1.5% in the UK after Moody's Investors Service, New York, warned it may downgrade the credit rating of the European Union as a whole because of the lingering debt crisis.
In other news, Bulgaria—the poorest member of the EU—indefinitely tabled longtime plans to adopt the euro, sticking instead to its lev currency. Although impoverished, Bulgaria is one of the least indebted European nations and tries to maintain a tight fiscal policy to avoid risks to its currency, which is pegged to the euro.
The October contract for benchmark US light, sweet crudes rebound $1.85 to $96.47/bbl Aug. 31 on the New York Mercantile Exchange. The November contract regained $1.80 to $96.76/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.85 to $96.47/bbl.
In its last trading day for the September contract, heating oil rose 4.51¢ to $3.17/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 2.3¢ to $3.11/gal.
The October natural gas contract continued climbing, up 5.1¢ to $2.80/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., advanced 1.2¢ to $2.74/MMbtu.
In London, the October IPE contract for North Sea Brent increased $1.92 to $114.57/bbl. Gas oil for September escalated $10.75 to $995/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 51¢ to $111.17/bbl on Aug. 31, then continued climbing to $112.11/bbl Sept. 3. So far this year, OPEC’s basket price has averaged $110.12/bbl.
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