Sam Fletcher
Senior Writer
HOUSTON, Oct. 8 -- Natural gas for November delivery jumped by 5% to a 6-week high Tuesday on the New York Mercantile Exchange, as traders scrambled to buy new supply contracts to offset existing lower-priced sales obligations after the US Energy Information Administration issued warnings of possible price spikes this winter.
Traders who had previously sold gas futures in expectation of declining prices faced losses in a rising market and were forced to cover their short positions Tuesday. "The funds have been heavily short, and a lot of them got caught yesterday," said analysts Wednesday at Enerfax Daily. "The technicals look good for some more upside, but a lot of traders are looking for a place to sell this rally."
Futures prices for oil and petroleum products on NYMEX were mixed Tuesday as traders adopted a wait-and-see attitude toward threats of a strike by Nigerian oil industry workers, effective Thursday. However, concern that a strike would disrupt world oil supplies pushed futures prices for light, sweet crudes above $30/bbl to the highest level in 6 months on the Tokyo Commodity Exchange early Wednesday.
Labor unrest in Nigeria
News sources reported many Nigerian oil workers are eager to join the 2-week strike that the Nigeria Labor Congress (NLC) plans to begin Thursday in protest of the recent hike in retail pump prices for petroleum products in that country. However, Nigerian union representatives have said the problems go beyond price increases. Union members are especially concerned about potential plans to privatize the downstream oil sector (OGJ Online, Oct. 6, 2003). NLC members are urging Nigeria's other oil industry union, the Trade Union Congress, to join the proposed strike.
Officials from the state-run Nigerian National Petroleum Corp. were scheduled to meet Tuesday with major retail marketers and union leaders in the capital Abuja in an attempt to avert the strike. Meanwhile, news sources reported NLC leaders were threatening to take on Nigerian law officers if they try to quell the strike. One NLC official was quoted as saying, "Nobody has the monopoly of mindless violence."
Representatives at Total SA's subsidiary Elf Petroleum Nigeria Ltd. and Royal Dutch-Shell Group's Shell Nigeria Exploration & Production Co. Ltd. said they are preparing for a possible strike. "We will scale down our operations, once it starts," said a Total official.
In other action, Rilwanu Lukman, former secretary general of the Organization of Petroleum Exporting Countries, confirmed Wednesday that he has resigned as special advisor to Nigerian President Olusegun Obasanjo on petroleum and energy issues.
"It is true. I have resigned. There is a time to be in, and there is a time to go. And this is the time to go," Lukman told the OPEC News Agency in a telephone interview early Wednesday. The agency reported Lukman gave no additional details about his decision. There was no indication whether his resignation is related to Nigeria's labor problems.
Formerly Nigeria's minister of petroleum resources, Lukman served as OPEC's secretary general in 1995-2000 and was the group's conference president for eight consecutive terms. He has served as special advisor to Nigeria's president since 1999.
Venezuela claims refining record
Venezuela, another OPEC member, claimed to have set a new record in its oil refining operations by processing more than 1.1 million bbl of oil in August at Petroleos de Venezuela SA's refinery on the nearby island of Curacao. Officials said that represented a 4.6% increase in the amount of oil refined prior to the general strike that crippled Venezuela's oil operations earlier this year.
Venezuela said its total refinery through-put plunged to 952,000 b/d after the start of that strike in December 2002 from previous levels of more than 1.09 million b/d in November. Now, officials said, processing at Venezuelan refineries averages 1.15 million b/d, including 952,000 b/d processed in Venezuela and 196,000 b/d at the Isla refinery in Curaco.
Excluding volumes refined at the Isla facility, PDVSA said it exported some 608,000 b/d of petroleum products to international markets in August, including 84,000 b/d of liquid natural gas, and sent some 460,000 b/d of products to its domestic market.
PDVSA claimed it increased its combined exports of crude and petroleum products to 2.36 million b/d in August from 2.27 million b/d in July.
Energy futures prices
The November natural gas contract closed at $5.14/Mcf Tuesday on NYMEX, up 23.6¢ for the day after trading at $4.88-5.21/Mcf. "The market opened higher and quickly jumped above $5[/Mcf], mainly trading between $5.10-5.20[/Mcf] all afternoon. The December contract jumped 22.2¢ to close at $5.405[/Mcf]," said Enerfax analysts.
"A colder 6-10-day weather forecast helped trigger some early buying, but a lagging cash market, still 40¢[/Mcf] below the NYMEX [price], and rising [US underground natural gas] storage should limit the upside," they said.
The November contract for benchmark US light, sweet crudes dipped by 6¢ to $30.41/bbl Wednesday on NYMEX, while the December position advanced by 7¢ to $30.38/bbl. The cash spot market price for West Texas Intermediate crude at Cushing, Okla., lost 10¢ to $30.38/bbl Tuesday.
Heating oil for November delivery gained 0.67¢ to 81.91¢/gal Tuesday on NYMEX, but gasoline for the same month declined by 0.66¢ to 83.61¢/gal.
In London, the November contract for North Sea Brent oil gained 14¢ to $29.03/bbl on the International Petroleum Exchange. The November natural gas contract was up by 0.68¢ to the equivalent of $4.13/Mcf on IPE. The December gas oil contract on IPE increased by 25¢ to $243.50/tonne.
The average price for OPEC's basket of seven benchmark crudes declined by 8¢ to $28.11/bbl Tuesday.
Contact Sam Fletcher at [email protected]
