Sam Fletcher
Senior Writer
HOUSTON, Oct. 21 -- Energy futures prices rebounded to new highs Wednesday, ending 2 consecutive days of profit-taking from the previous run-up on the New York Mercantile Exchange.
This latest spike in commodity prices was driven by an Energy Information Administration report early Wednesday that US distillate fuel stocks plummeted by 1.9 million bbl to 119 million bbl during the week ended Oct. 15 (OGJ Online, Oct. 20, 2004). "Distillate inventories are now 10.1% below last year and 9.5% below normal. Also, heating oil, or higher sulfur distillate fuel oil, inventories fell 515,000 bbl last week with inventories now 11% below last year and 23% below normal with the start of winter approaching," said Robert S. Morris, Banc of America Securities LLC, New York.
Despite recent record high prices for distillate fuel, "production has not responded," said Paul Horsnell, Barclays Capital Inc., London. "The refining system [is] finding it impossible to achieve any catch-up after the reduction in output caused by Hurricane Ivan."
Higher prices possible
Market fundamentals, especially for heating oil, "continue to argue for higher prices," said Horsnell. "Unlike in previous years, there is no potential exportable surplus of heating oil in Europe to help ameliorate the tightness in the US."
He also noted, "Retail fuel prices in the US, while still very modest indeed by European standards, have continued to set new records." The US Department of Energy reported that the retail price for regular unleaded gasoline in Los Angeles recently averaged $2.441/gal, the highest level ever recorded in the US. "The national average [retail gasoline price] has risen back above $2/gal and is now less than 3¢ below the peak hit in late May," Horsnell said. "While gasoline continues to be the main focus of attention because of its direct impact on discretionary consumer expenditure, the more extreme rise in diesel prices should not be overlooked."
Horsnell said, "Diesel prices have risen by 68¢/gal since the start of [this] year and currently show a year-over-year rise of 45%. The dramatically increased cost of road and rail freight has to be absorbed somewhere, whether in reduced profits along the supply chain or pressure on the prices charged to the final consumer. Recent movements in wholesale prices offer the prospect of some pressure coming off retail gasoline prices. By contrast, the heating oil price crisis means that the retail diesel prices are unlikely to gain sufficient relief very quickly."
Energy prices
The expiring November contract for benchmark sweet, light crudes shot past the key price level of $55/bbl that it first touched last Friday to an all-time peak of $55.20/bbl Wednesday before closing at $54.92/bbl, up by $1.63 for the day to just 1¢ short of last week's record finish. The December contract shot up by $1.77 to $54.41/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also gained $1.63 to $54.92/bbl.
Heating oil for November delivery jumped by 5.19¢ to a record closing of $1.5604/gal, after climbing as high as $1.565/gal in intraday trade Wednesday on NYMEX. Gasoline for the same month was up by 4.59¢ to $1.40/gal. The November natural gas contact continued to build on its gains from the previous two NYMEX sessions, soaring by 50¢ to $7.62/Mcf, "the highest settlement price in nearly 2 years," said analysts Thursday at Enerfax Daily.
In London, the December contract escalated by $1.75 to $50.52/bbl Wednesday on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes climbed by 89¢ to $45.87/bbl Wednesday.
Contact Sam Fletcher at [email protected]
