Sam Fletcher
Senior Writer
HOUSTON, Nov. 13 -- Oil prices generally increased Wednesday in reaction to recent terrorist attacks in the Middle East. The threat of more attacks apparently has become a major concern among traders, analysts said.
The December contract for benchmark US light, sweet crudes gained 18¢ to $31.33/bbl Wednesday on the New York Mercantile Exchange. However, the January position dipped by 1¢ to $30.89/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also increased by 18¢ to $31.33/bbl, duplicating the movement of the near-month futures contract.
Unleaded gasoline for December delivery was up by 1.04¢ to 85.42¢/gal Wednesday on NYMEX. Heating oil for the same month gained 0.28¢ to 84.69¢/gal.
The December natural gas contract fell 13¢ to $4.74/Mcf Wednesday. "Prices could tank soon unless colder weather arrives," said analysts Thursday at Enerfax Daily.
US weather last week was 6% warmer than normal and 11% warmer than last year, reported Ronald J. Barone Thursday at UBS Warburg LLC, New York.
Natural gas outlook
Although it was the first week of the current heating season, injections of natural gas into US underground storage continued at the rate of 32 bcf during the week ended Nov. 7, increasing total storage to nearly 3.198 tcf, the US Energy Information Administration reported early Thursday. That compares with an injection rate of 34 bcf the previous week and the withdrawal of 48 bcf of gas during the same period last year. US natural gas stocks now exceed the year-ago level by 90 bcf and are 121 bcf above the 5-year average for this time of year.
Meanwhile, natural gas imports from Canada are on tract to decline by at least 7% this year, said Robert S. Morris at Banc of America Securities LLC, New York. "Canadian natural gas production actually declined nearly 3% year-over-year during the first 10 months of 2003, according to pipeline receipt data. However, Canadian imports into the US declined roughly 8.5% during the same period," Morris said.
The larger drop in US imports was due partially to "Canadian storage operators aggressively trying to refill storage, given the low storage levels at the end of March," he said.
US oil stocks decline
EIA also reported Thursday that US commercial crude oil inventories declined by 800,000 bbl to 291.1 million bbl last week. That put US oil stocks 12.4 million bbl below the 5-year average for the period. US distillate fuel stocks fell by 1.5 million bbl to 131.2 million bbl in the same period, 500,000 bbl below the 5-year average, EIA said. Almost all of the distillate decrease was in diesel fuel.
EIA reported US gasoline inventories increased by 1 million bbl to 192.3 million bbl during the week, yet were 8.4 million bbl below the 5-year average.
Crude inputs into US refineries averaged more than 15.1 million b/d during the week ended Nov. 7, down by 395,000 b/d from the previous week, EIA said. Declines were seen in all regions, reversing a 4-week period of input increases. "The drop this week appears to be mostly from some refineries which did not perform maintenance last month," EIA said
US crude imports averaged more than 9.9 million b/d during the week, down by 228,000 b/d from the previous week. "It appears that crude oil imports from Venezuela were particularly high last week," EIA said.
Other energy prices
In London, the December contract for North Sea Brent oil gained 11¢ to $29.20/bbl Wednesday on the International Petroleum Exchange. Gas oil for December delivery lost 75¢ to $255/tonne. However, the December natural gas contract jumped by 9.9¢ to the equivalent of $5.51/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' was unchanged at $28.63/bbl Wednesday.
World oil demand increasing
Meanwhile, with indicators pointing to acceleration of global economic growth, Paris-based International Energy Agency increased its forecasts of world oil demand by 180,000 b/d to 78.6 million b/d in 2003 and by 200,000 b/d to 79.6 million b/d in 2004.
The US gross domestic product surged by 7.2% during the third quarter of this year—"the strongest annualized quarterly rate of growth since the mid-1980s," said IEA officials Thursday. "The Japanese and European economies are expanding faster than originally expected, and Chinese GDP growth keeps roaring along at a blistering pace. While uncertainties may yet constrain the future rate of economic growth," they said, "current trends are positive for the global economy."
EIA is projecting global oil demand will grow "at a healthy 1.7% in 2003, falling back to 1.4% in 2004" with the loss of "one-time factors such as high natural gas prices, nuclear issues, colder-than-normal weather, etc., that supported oil demand in 2003."
That growth trend is "partly offset by lackluster regional developments," however. Oil demand growth among member countries of the Organization for Economic Cooperation and Development "remains decidedly anemic, despite the recent surge in US economic growth and the nascent recovery in Europe and the Pacific," IEA officials said. They project total OECD oil demand will grow by 617,000 b/d in 2003 and 247,000 b/d in 2004.
The projected 2003 growth is up from a 77,000 b/d decrease in 2002 but falls short of the previous 5-year average growth rate, IEA officials reported. "In spite of the surge in economic activity, 2004 oil demand growth reflects a shallower industrial recovery and an extrapolation of recent growth patterns," they said.
IEA is expecting a robust economy to trigger a surge in Chinese demand for oil in 2003-2004. "The Chinese economy will need to expand at torrid pace to create new jobs to be able to absorb displaced workers from inefficient and defunct state enterprises and to position itself for full entry [into the World Trade Organization]," it said.
"Questions abound as to the sustainability of China's GDP growth, the impact of this growth on the environment and social fabric, and whether these growth factors are contributing to a bubble economy," IEA officials acknowledged. Nevertheless, they said, "Our most recent forecast suggests that Chinese oil demand is set to grow by 443,000 b/d, or 9%, in 2003, followed by growth of 306,000 b/d, or 6%, in 2004."
At those rates, China is expected to eclipse Japanese oil demand in the second half of 2003 and will represent the equivalent of 67% of OECD Pacific oil demand in 2004. "This underpins a clear disconnect in regional oil demand developments," IEA reported. "At this juncture, China is the engine of global oil demand growth with significant room for further expansion in the industrial and transportation sectors."
Low gasoline prices
Adjusted for inflation, retail prices for gasoline in the US are at the lowest level in 85 years, said the American Petroleum Institute in a letter to Congress. API noted the seasonal falloff in gasoline demand in autumn, reducing the August peak in prices that was fueled by strong demand, low inventories, pipeline disruptions, and an electrical blackout over a large portion of the US.
Moreover, oil prices—the single largest component in gasoline costs—are now down to $29/bbl from $32/bbl in September, API said.
Contact Sam Fletcher at [email protected]
