Sam Fletcher
OGJ Senior Writer
HOUSTON, Dec. 12 -- Energy futures prices declined Wednesday as traders took profits from the market rally earlier this week.
Meanwhile, in a move to improve market credibility, ministers of the Organization of Petroleum Exporting Countries agreed Thursday to raise their collective production quotas by 6%, or 1.3 million b/d, while practicing stricter compliance with production limits (OGJ Online, Dec. 12, 2002).
Saudi Arabia, OPEC's most powerful member, had urged the group to curb excess production by as much as 2 million b/d while simultaneously hiking OPEC's collective quota by 1.5 million b/d. The result, the Saudis claimed, would be an increase only on paper, adding no new barrels of oil to the market. The new quota target of 23 million b/d is effective Jan. 1.
In Venezuela, a charter member of OPEC, oil production by Petroleos de Venezuela SA (PDVSA) fell to 600,000-650,000 b/d this week, less than a third of its previous output, as a result of a general strike aimed at forcing Venezuelan President Hugo Chavez out of office. Venezuela's oil production normally is 3 million b/d but was down to 2.2 million b/d prior to the strike, various sources reported.
Critics blame Chavez's left-leaning policies for deepening the country's economic crisis. Chavez, whose primary support is among Venezuela's poorest residents, described the strike as "a kind of collar-and-tie subversion" backed by business and political opponents "that penetrated the (oil) industry, expropriated it from Venezuelans a long time ago, people who believed that PDVSA was theirs."
The government is employing PDVSA retirees, untrained strikebreakers, and even military forces to restore production and transportation of oil and petroleum products. Earlier this week, military personnel commandeered fuel transport trucks from private companies to provide gasoline in the capital city of Caracas where a serious shortage was reported. However, sources said the government was able to roll only 200 of the 1,700 fuel transport trucks normally in daily use.
Heavily armed sailors from Venezuela's navy scrambled up ropes to board the Venezuelan propane tanker, Yavire, and the oil tanker Pilin Leon. The captains of both vessels were arrested, reportedly for refusing to deliver their cargoes as part of the strike.
Venezuelan government officials claimed they had cracked the strike and "broken the blockade" by loading at least five tankers with a total 2.23 million bbl of crude for shipment to the US. However, there were conflicting reports that none of the tankers had departed because of pump problems at the loading terminal.
Some 40 oil tankers were reported waiting to be loaded at Venezuelan terminals Wednesday, and the International Association of Independent Tanker Owners (Intertanko) expressed "deep concern over safety levels at terminals and waterways in that country.
"As the strike has been expanded to include pilots, tugs, and crew on board PDVSA's own tankers, several episodes have been reported where berthing and unberthing maneuvers have been undertaken in what appears to be unsafe conditions," said Intertanko officials.
They voiced "fear that recent actions by government and military forces will contribute to increased antagonism, prolonging the crisis and disruption to refinery and shipping activities," along with concern "over possible insurance issues and the ability to provide safe ports for tankers calling at Venezuelan terminals."
Venezuelan officials said that country is losing $50 million a day due to the shutdown of refineries and ports serving PDVSA. Venezuela's total refinery output has been cut to 80,000 b/d from nearly 1 million b/d, sources reported.
Negotiations between the opposing factions appeared to be at an impasse late last week. However, Rafael Ramirez, Venezuela's minister of energy and mines, said a complete restructuring of PDVSA has been ordered. Government officials Thursday announced the dismissal of Juan Fernandez, one of PDVSA's top managers and a leader in the nationwide strike.
The January contract for benchmark US sweet, light crudes dropped 34¢ to $27.40/bbl Wednesday on the New York Mercantile Exchange, while the February position retreated by 35¢ to $27.42/bbl.
Unleaded gasoline for January delivery fell 1.48¢ to 77.39¢/gal. Heating oil for the same month was down 0.32¢ to 76.87¢/gal.
However, the January natural gas contract gained 7.3¢ to $4.71/Mcf on NYMEX. "With the forecast for last half of this month changing from milder than normal to colder than normal, and the anticipation of the (Energy Information Administration) reporting a huge storage withdrawal (Thursday), the market saw few sellers," said analysts at Enerfax Daily.
EIA said Thursday that withdraws of natural gas from US underground storage jumped to 162 bcf during the week ended Dec. 6, up from 91 bcf the previous week and 17 bcf during the same period a year ago. That far exceeded the expectations of most market analysts and dropped remaining US storage below 2.8 tcf. That equates to a deficit of 444 bcf from year-ago storage levels and 82 bcf below the 5-year average.
In London, the January contract for North Sea Brent oil lost 17¢ to $26.25/bbl on the International Petroleum Exchange. The January natural gas contract declined 9.3¢ to the equivalent of $4.08/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes increased by 25¢ to $26.70/bbl Wednesday.
Contact Sam Fletcher at [email protected]
