Sam Fletcher
Senior Writer
HOUSTON, Sept. -- Benchmark US crude hit a new record high closing price Friday on the New York Mercantile Exchange amid continued slow recovery of Gulf of Mexico production and growing concern about armed conflict in Nigeria.
The Royal Dutch-Shell Group said Friday it was evacuating nonessential staff from two facilities in the oil-producing area of Port Harcourt, Nigeria, because of escalating combat between the Nigerian army and rebel militia in the last 2 weeks (OGJ Online, Sept. 24, 2004).
Ivan's impact lingers
When Hurricane Ivan tore through the Gulf of Mexico earlier this month, it "not only led to a sharper-than-expected drop in US crude oil inventories but also appears to have caused more damage than initially suspected in the offshore and Gulf Coast region," said Robert S. Morris, Banc of America Securities LLC, New York. Damage to offshore pipelines and infrastructure may take several weeks to repair.
As of Friday, the US Minerals Management Service reported gulf production amounting to 2.4 bcfd of natural gas and 500,000 b/d of crude was still shut in as a result of Ivan. It reported a cumulative loss of 43 bcf of gas and 10 million bbl of crude during Sept. 13-24.
"It now appears that the total 'lost' production as a result of Hurricane Ivan could end up being 60-90 bcf with nearly 20% of total offshore Gulf of Mexico natural gas production still shut in. Some operators stated that damage to certain facilities [and] infrastructure could take up to 2 months to repair," Morris said Monday.
Meanwhile, Department of Energy officials confirmed Friday the approval of loans of 1.4 million bbl of crude to Shell Trading US Co. and of 300,000 bbl to Placid Refining Co., Port Allen, La., because of oil supply disruptions caused by Hurricane Ivan. The oil is to be returned to the SPR with interest once supply conditions return to normal (OGJ Online, Sept. 24, 2004). DOE is considering similar requests by additional refiners.
"One of the underlying concerns is the ability of refiners to rebuild US heating oil inventories, which are now nearly 17% below normal, with just a little over 1 month before winter kicks off," said Morris.
Energy prices
The November contract for benchmark US light, sweet crudes climbed 42¢ to a record high closing of $48.88/bbl Friday, short of the Aug. 20 NYMEX intraday high price of $49.40/bbl. The near-month crude futures price has increased 12% over the last seven sessions. The December contract was up 35¢ to $48.08/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 44¢ to $48.81/bbl.
Heating oil and gasoline for November delivery gained 0.5¢ each to $1.3579/gal and $1.3482/gal, respectively. The November natural gas contract lost 17.2¢ to $5.39/Mcf Friday on NYMEX. "The [gas futures] market fell for the second session in a row as the rally that pushed prices up more than [$1/Mcf] on the back of production outages from Hurricane Ivan seems to have run its course," said analysts Monday at Enerfax Daily.
In London, the November contract for North Sea Brent crude increased by 20¢ to $45.33/bbl Friday on the International Petroleum Exchange. Gas oil for October delivery dipped by 50¢ to $422.50/tonne. The October natural gas contract fell by 12¢ to the equivalent of $5.24/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes inched up by 4¢ to $42.31/bbl Friday. For last week as a whole, the OPEC basket price averaged $40.97/bbl, up by $1.15 from the previous week. So far this year, the OPEC basket price has averaged $34.53/bbl, up from $24.36/bbl for all of 2003.
Contact Sam Fletcher at [email protected]
