Sam Fletcher
Senior Writer
HOUSTON, July 14 -- Natural gas prices continued to fall Friday on the New York Mercantile Exchange, even as a strengthening Tropical Storm Claudette veered toward the Gulf of Mexico and operators began evacuating nonessential personnel from offshore platforms.
The August natural gas contract fell 10.4¢ to $5.15/Mcf Friday, following a loss of 26.2¢/Mcf in the previous NYMEX session.
Usually the threat of a potential hurricane that could disrupt production in the gas-prone gulf would trigger a rally in natural gas prices as traders scramble to cover short contracts in the futures market. Claudette was credited for rises in futures prices for crude and petroleum products during the NYMEX trading session Friday.
But traders in the NYMEX gas market remained focused on the recent record pace of gas injections into US underground storage, including a larger-than-expected input of 111 bcf during the week ended Apr. 4. "The market opened up and moved somewhat higher early (Friday), hitting the daily peak of $5.32(/Mcf) by mid-morning, but fell off rapidly in afternoon trading, closing on the downswing," despite reports of "a tiny supply cut and several platform evacuations ahead of the storm," said analysts Monday at Enerfax Daily.
"Technical traders said the market was oversold and due for a bounce, particularly after Thursday's 5% tumble," analysts said. Meanwhile, the composite spot natural gas price posted a slight gain last week.
Regardless of triple-digit injections of gas into underground storage in 5 of the last 6 weeks reported by the US Energy Information Administration, the current US inventory of 1.77 tcf is still 25% below year-ago levels and 15% under the 5-year average, said Enerfax analysts. "The 5-year average injection for the remaining 17 weeks until November is about 969 bcf, or 57 bcf/week, which would put inventories at 2.74 tcf by winter," they said. "To get to the 3 tcf (comfort) level, average weekly injections of 72 bcf are needed. The highest injection total for the 17-week period over the last 5 years was about 1.18 tcf, or 69 bcf/week, in 2001."
Meanwhile, the recent decline in natural gas prices vs. a simultaneous increase in distillate prices is again making gas more attractive to customers with dual-fuel capabilities, said Robert S. Morris, Banc of America Securities LLC, New York. He expects 1-1.5 bcfd of currently reduced demand for natural gas to be regained as customers switch back to gas, which is now more affordable.
Weather forecasters were predicting Monday that Claudette would hit the Texas coast north of Corpus Christi with near-hurricane force late Tuesday. Claudette's center—just under hurricane strength, with maximum sustained winds of 65 mph—was 290 miles east-southeast of Corpus Christi early Monday. It apparently would pose relatively little threat to offshore operations, if it performs as predicted.
Oil prices
The August contract for benchmark US light, sweet crudes gained 22¢ to $31.28/bbl Friday on NYMEX, while the September position advanced by 28¢ to $31.05/bbl. Unleaded gasoline for August delivery jumped by 1.44¢ to 94.74¢/gal. Heating oil for the same month was up 0.19¢ to 80.65¢/gal.
Refineries along the Texas Gulf Coast were in the early stages Monday of preparing for Tropical Storm Claudette. At Valero Energy Corp.'s refinery in Corpus Christi, workers were cleaning up work areas, securing loose items around the plant, filling raw water tanks, and fueling vehicles. However, officials at Valero's headquarters in San Antonio, Tex., said early Monday, "At this time, there are no plans to affect refinery production operations due to the hurricane."
In London, the August contract for North Sea Brent oil gained 31¢ to $29.19/bbl Friday on the International Petroleum Exchange. The August natural gas was essentially unchanged at the equivalent of $2.75/Mcf on IPE, with variations in the exchange value between the US dollar and the British pound creating a 1¢ dip in the equivalent price from the previous session.
The average price for the Organization of Exporting Countries' basket of seven benchmark crudes gained 16¢ to $28.14/bbl Friday.
For the week as a whole, however, the basket price averaged $27.26/bbl, up 12¢ from the previous week's average. So far this year, OPEC's basket price has averaged $28.04/bbl, up from an average $24.36/bbl for all of 2002.
Contact Sam Fletcher at [email protected]
