MARKET WATCHFahd's death raises crude futures prices

Aug. 1, 2005
Crude futures prices climbed above $61/bbl in early trading on the New York market following the death of Saudi Arabia's King Fahd bin Abdul Aziz on Aug. 1.

Sam Fletcher
Senior Writer

HOUSTON, Aug. 1 -- Crude futures prices climbed above $61/bbl in early trading on the New York market following the death of Saudi Arabia's King Fahd bin Abdul Aziz on Aug. 1.

However, the price escalation apparently was checked by the likelihood that the new king, the former Crown Prince Abdullah bin Abdulaziz al-Saud, would maintain Saudi Arabia's current oil policy of supplying world markets. Abdulla, Fahd's half-brother, had been de-facto ruler of Saudi Arabia since Fahd suffered a stroke in 1995.

Meanwhile, loading operations at Saudi Arabian oil terminals continued as normal, apparently unaffected by Fahd's death, observers reported.

Energy prices earlier continued to climb in trading on July 29, largely as a result of previous refinery mishaps. Murphy Oil Corp. shut down a diesel hydrotreater following a fire July 28 at its 120,000 b/d Meraux refinery. That was followed by an explosion and fire involving a hydrotreater at British Petroleum PLC's 446,500 b/d Texas City plant (OGJ Online, July 29, 2005).

Another fire, quickly extinguished, forced BP to shut in 120,000 b/d of crude production on a platform in its North Sea Schiehallion oil field. There was no indication as to when production might be resumed.

"More importantly, a fire destroyed an 110,000 b/d platform offshore India," said Robert S. Morris, Banc of America Securities, New York, in an Aug. 1 report. "The government hopes to use temporary facilities to restore 70% of production within a month. However, analysts believe a more realistic target is 50% of production within 6 months. Rebuilding of the destroyed platform could take as long as 2 years," he said.

Energy prices
The September contract for benchmark US light, sweet crudes climbed by 63¢ to $60.57/bbl July 29 on the New York Mercantile Exchange. The October contract escalated by 67¢ to $61.65/bbl. On the US spot market, West Texas Intermediate increased by 62¢ to $60.57/bbl. Gasoline for August delivery bumped up by 1.67¢ to $1.74/gal on NYMEX. However, heating oil for the same month lost 0.93¢ to $1.64/gal.

The September natural gas contract jumped by 19.1¢ to $7.89/MMbtu July 29 on NYMEX, spurred by rising crude prices, "slightly warmer" revised weather forecasts, and expectations of another bullish report this week on US gas storage, said analysts at Enerfax Daily.

The latest storage injection of 42 bcf reported by the Energy Information Administration for the week ended July 22 "implies there has not been any 'backed-out' demand this summer, and thus we believe that the higher-than-expected [injection] figures the prior 2 weeks were somewhat of an anomaly," Morris said. "Also we have spoken to several industry sources recently who indicated that they have not detected any drop off in industrial demand [for natural gas] this summer."

In London, the September contract for North Sea Brent crude gained 61¢ to $59.37/bbl July 29 on the International Petroleum Exchange. Gas oil for August delivery was up by $9 to $525/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by $1.07 to $54.20/bbl on July 29. So far this year, the OPEC basket price has averaged $47.57/bbl.

Contact Sam Fletcher at [email protected]