Sam Fletcher
Senior Writer
HOUSTON, Sept. 23 -- Crude futures prices jumped to near-record levels Wednesday when the Energy Information Administration reported a large drop in US inventories of crude and petroleum products in the wake of Hurricane Ivan.
Traders had anticipated some impact, but US crude stocks plunged by 9.1 million bbl to 269.5 million bbl in the week ended Sept. 17, "well below the lower end of the average range for this time of year," EIA officials said. It marked the eighth consecutive week that EIA reported declines in US crude inventories, including a 7.1 million bbl drop the previous week.
US gasoline stocks fell by 2.8 million bbl to 199.7 million bbl in the latest period, and distillate inventories dropped by 1.5 million bbl to 126.8 million bbl, with heating oil accounting for most of the decrease.
"The falls in oil product inventories are more significant than the fall in crude inventories," said Paul Horsnell, Barclays Capital Inc., London. "Crude imports will rebound, while restoring balance in oil products will take far longer."
The US Minerals Management Service reported Wednesday that, in the Gulf of Mexico, 578,411 b/d of oil and 2.4 bcfd of natural gas production were still shut in nearly a week after Ivan made landfall in Alabama. That's equivalent to 34% of the oil and 19.51% of the natural gas normally produced in the gulf and did not include production lost as a result of seven fixed platforms destroyed by the storm, said MMS. It said the cumulative amount of production lost to shut-ins Sept. 13-22 totaled 9 million bbl of oil and 38.6 bcf of natural gas.
Thursday, a weakened Ivan again threatened oil and gas operations off Texas and Louisiana. After making landfall last week, Ivan broke apart as it traveled north, drenching southern and mid-Atlantic states before returning to sea where it strengthened into a tropical storm that again forced evacuations of some offshore oil and gas facilities.
Energy prices
The November contract for benchmark US sweet, light crudes jumped Wednesday by $1.59 to $48.35/bbl—the second highest settlement price ever, said analysts—on the New York Mercantile Exchange. The December contract was up by $1.42 to $47.58/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained $1.46 to $48.56/bbl.
Gasoline for October delivery shot up by 5.34¢ to $1.343/gal Wednesday on NYMEX, while natural gas for the same month increased by 2.1¢ to $5.63/Mcf. Concerns of possible shortages of heating oil during the peak winter season pushed the October heating oil contact to a record high of $1.352/gal on NYMEX before it dipped to $1.3444/gal at the close of that session, up 4.15¢ for the day.
Horsnell noted "two key features of trading over the past week; the distillate-led swing in prices back up towards $50[/bbl for crude] and the continuing shift in the balance of speculative money towards the short side of the market [with an excess of open sales.]" He pointed out "a series of new highs" in distillate markets. "In the US, heating oil futures have settled above $1.30/gal for the first time, and the national average for retail diesel prices has made its first ever pass through $1.90/gal," Horsnell said. "The increase in diesel prices has become significantly more onerous than that in gasoline."
Earlier this week on the International Petroleum Exchange in London, the gas oil futures price moved above $400/tonne for the first time, "taking European diesel prices on to record levels with it," said Horsnell.
Wednesday, the November contract for North Sea Brent crude escalated by $1.54 to $44.93/bbl on IPE. Gas oil for October delivery gained $13 to $422.50/tonne. The October natural gas contract increased by 5.5¢ to $5.42/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was up by $1.04 to $41.75/bbl Wednesday.
Contact Sam Fletcher at [email protected]
