Sam Fletcher
Senior Writer
HOUSTON, Oct. 6 -- The November contract for benchmark US light, sweet crudes soared to a record high closing of $51.09/bbl Tuesday, up by $1.18 for the day, after trading at an all-time high of $51.29/bbl in that session on the New York Mercantile Exchange.
Worries about supply disruptions spurred price increases across the entire range of energy commodities. The US Minerals Management Service said Tuesday that 453,092 b/d of oil and 1.7 bcfd of natural gas production in the Gulf of Mexico were still shut in nearly 3 weeks after Hurricane Ivan tore through those waters. That's equivalent to 26.7% of daily oil production and 14.1% daily gas production from the US sector of the gulf. Cumulative production lost because of shut-in wells since Sept. 11 totals 15.3 million bbl of oil and 67.9 bcf of natural gas.
Purnomo Yusgiantoro, conference president of the Organization of Petroleum Exporting Countries, said Tuesday that group is willing to use its remaining production capacity to try to drive down escalating crude prices, which some estimate could spike to $60/bbl. However, one of the primary factors driving up crude prices is widespread concern over the unusually small amount of excess production capacity now remaining in the face of rising world demand.
Wednesday, analysts at Friedman, Billings, Ramsey & Co. Inc., Arlington, Va., said they expect OPEC to increase its crude production capacity by 2.4 million b/d, including 400,000 b/d of NGL, in 2004-2006, with the gains coming primarily from Kuwait, Nigeria, and Saudi Arabia.
"Over the last 10 years, crude oil produced by non-OPEC countries has increased by an annual amount of approximately 850,000 b/d according to the International Energy Agency. We expect this rate to rise by almost 30% over the 2004-2006 timeframe (to 1.1 million b/d) due primarily to increases from Russian oil companies. However, despite this higher production, global demand growth should significantly exceed non-OPEC supply, which should give OPEC the ability to maintain high prices," analysts said.
They said, "The combination of strong demand, limited spare production capacity, and a weak dollar should keep crude oil prices well above historic levels." Therefore, the company raised its average price forecast for West Texas Intermediate for 2004 to $41/bbl from $38/bbl and to $39/bbl from $30/bbl for 2005.
The analysts expect OPEC to raise its target price band to $27-33/bbl at the cartel's December meeting, from $22-28/bbl currently, so they've hiked their "mid-cycle" crude price assumption to $33/bbl for WTI, up from $25/bbl.
Energy prices
The December crude contract jumped by $1.13 to $50.64/bbl Tuesday on NYMEX. On the US spot market, WTI at Cushing, Okla., escalated by $1.19 to $51.10/bbl. Gasoline for November delivery increased by 2.97¢ to $1.37/gal on NYMEX, while heating oil for the same month gained 2.12¢ to $1.41/gal. The November natural gas contract shot up by 43.9¢ to close at $7.16/Mcf, after trading as high as $7.23/Mcf during the session.
"An early autumn chill in the Northeast spooked [gas futures] traders about the upcoming winter," said analysts Wednesday at Enerfax Daily. "Some traders were surprised at the strength of the market's reaction to temperatures that should still allow for an above-average build in gas storage, even with some Gulf of Mexico production remaining offline."
In London, the November contract for North Sea Brent crude was up by 94¢ to $47.13/bbl on the International Petroleum Exchange.
The average price for OPEC's basket of seven crudes increased by 52¢ to $43.80/bbl Tuesday.
Contact Sam Fletcher at [email protected]
