By OGJ editors
HOUSTON, Jan. 9 -- Futures prices for oil and petroleum products continued their downhill tumble Wednesday amid reports that the drawdown of US crude inventories last week was not as large as expected with the disruption of oil imports from Venezuela.
The American Petroleum Institute reported Wednesday that US oil stocks declined by 2 million bbl to 275.5 million bbl, primarily because a substantial build of crude inventories on the US West Coast partially offset declines in other areas.
Other sources said increased imports from Mexico and Saudi Arabia also helped fill the gap in heavy oil shipments from Venezuela. API reported US imports of crude increased by 1.3 million b/d to 8.9 million b/d during the week ended Jan. 3.
According to API, US distillate stocks increased by 6.6 million bbl to 134.4 million bbl last week; gasoline inventories rose by 4.8 million bbl to 210.6 million bbl last week, with US refineries operating at 90.3% efficiency, down from 90.7% the previous week.
The US Department of Energy estimated Wednesday that US oil stocks increased by 400,000 bbl last week.
Nevertheless, Matthew Warburton with UBS Warburg LLC, New York, said Thursday that total US petroleum stocks remain in the low end of their 5-year range and "under modest (price) pressures in the near term."
OPEC action expected
Warburton noted that member oil ministers from the Organization of Petroleum Exporting Countries are scheduled to meet Sunday in Vienna "to ratify an increase in production that is already being implemented."
Late last year, industry analysts estimated that the 10 active OPEC members, minus Iraq, were overproducing by 2.5 million b/d above their official production quota of 21.7 million b/d. On Dec. 11, OPEC ministers agreed to raise their production quota by 1.3 million b/d to 23 million b/d, effective Jan. 1, while simultaneously trimming back overproduction to fit that new target (OGJ Online, Dec. 12, 2002).
Some analysts expect OPEC members to increase their production quota again this week to some point between the additional 1 million b/d favored by Libya and Algeria and the 1.5 million b/d that Saudi Arabia proposes (OGJ Online, Jan. 8, 2003). A hike of 1.2 million b/d to 24.2 million b/d would raise OPEC's official production quota to the actual level that its members achieved last year through cheating.
Meanwhile, Warburton said, "There is little doubt that supply is now rising and will rise further if Venezuelan crude exports continue at current restricted levels (of about 500,000 b/d)."
Although not members of OPEC, Russia and Mexico have indicated plans to increase production that could help offset the current loss of Venezuelan production and the potential loss of Iraqi exports through a likely attack by US-led forces.
Mexico said last month it would increase its oil exports by 100,000 b/d to 1.76 million b/d, effective this month. Russia has indicated plans to increase its production by 10% this year from 8 million b/d in 2002. However, some observers said it would take Russia 3-4 months to "reactivate" some spare production capacity because of bottlenecks at ports and pipelines.
Market prices
The February contract for US sweet, light crudes lost 52¢ to $30.56/bbl Wednesday on the New York Mercantile Exchange. The March position was down 49¢ to $30.06/bbl. Heating oil for February delivery dropped 1.67¢ to 83.21¢/gal. Unleaded gasoline for the same month retreated 0.67¢ to 83.51¢/gal.
The February natural gas contract gained 3.4¢ to $5.16/Mcf on NYMEX, boosted by weather forecasts of sustained cold for the last half of February and into March. "The EIA (Energy Information Administration) says spot prices in January easily could reach $6/MMbtu if the frigid temperatures forecast actually show up," said analysts at Enerfax Daily.
EIA officials reported Thursday that 86 bcf of natural gas was withdrawn from US underground storage last week, down from 123 bcf the previous week and 200 bcf a year ago. US gas storage now stands at 2.3 tcf, down 459 bcf from a year ago and 2 bcf below the 5-year average.
In London, the February contract for North Sea Brent oil lost 54¢ to $28.79/bbl on the International Petroleum Exchange. The February natural gas contract dropped 5.3¢ to the equivalent of $3.62/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes lost 86¢ to $28.86/bbl Wednesday.
