By OGJ editors
HOUSTON, Sept. 16 -- Energy futures prices fell Wednesday as investment funds took profits from the earlier rally after deciding Hurricane Ivan might not have damaged offshore oil and gas facilities as was first feared.
The decision Wednesday by members of the Organization of Petroleum Exporting Countries to hike their collective production quota by 1 million b/d to a record 27 million b/d, effective Nov. 1, was dismissed by analysts as "symbolic" and "trivial," since the group currently is producing 28 million b/d of crude. However, OPEC said Thursday it should produce "a considerable amount of excess crude" this year¿"well over 1 million b/d"¿if it continues its current high level of production.
Ivan came ashore at Gulf Shores, Ala., early Thursday, kicking up a tidal surge and dumping rain that threatened to swamp coastal areas from Louisiana to the Florida Panhandle. There were no immediate reports of damage to offshore facilities in the Gulf of Mexico.
However, analysts at Friedman, Billings, Ramsey & Co. Inc., Arlington, Va., said Thursday the hurricane forced the shutdown of 11% of US refining capacity, or approximately 1.9 million b/d. "As a result of these reduced production levels and fears of additional refinery disruptions, Hurricane Ivan could mitigate the typical September pattern of rising inventory levels [of petroleum products] over the next several weeks," analysts said. "However, we believe this near-term positive situation should be short lived, as the refineries are likely to return to normal operations within a week's time."
Meanwhile, Tropical Storm Jeanne escalated into a hurricane Thursday in the Caribbean as it moved westward across the north coast of Puerto Rico with 80 mph winds. Forecasters said it could be near Florida's east coast as early as the weekend.
The October contract for benchmark US sweet, light crudes dropped by 81¢ to $43.58/bbl Wednesday on the New York Mercantile Exchange, while the November contract fell by 83¢ to $43.51/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 81¢ to $43.59/bbl. The October natural gas contract declined by 10.4¢ to $4.82/Mcf Wednesday on NYMEX. Those price reductions wiped out the previous day's gains in those markets.
Other energy commodities suffered smaller setbacks on NYMEX. Gasoline for October delivery lost 2.59¢ to $1.21/gal Wednesday. Heating oil for the same month also settled at $1.21/gal, down by 2.15¢ for the day.
In London, the October contract for North Sea Brent crude increased by 12¢ to $41.85/bbl on the International Petroleum Exchange. Gas oil for October delivery inched up by 50¢ to $393/tonne. However, the October natural gas contract plunged by 32.2¢ to the equivalent of $5.09/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes lost 5¢ to $39.02/bbl Wednesday.
