MARKET WATCHGlobal turmoil triggers rebound in energy prices

Aug. 22, 2005
Energy prices spiked higher on Aug. 19, regaining most of oil futures losses earlier last week on the New York market, as protestors disrupted crude production in Ecuador and Nigeria, and a terrorist rocket attack narrowly missed two US Navy vessels in the port of Aqaba, Jordan, near the borders of both Israel and Saudi Arabia.

Sam Fletcher
Senior Writer

HOUSTON, Aug. 22 -- Energy prices spiked higher on Aug. 19, regaining most of oil futures losses earlier last week on the New York market, as protestors disrupted crude production in Ecuador and Nigeria, and a terrorist rocket attack narrowly missed two US Navy vessels in the port of Aqaba, Jordan, near the borders of both Israel and Saudi Arabia.

Ecuador, the second largest South American supplier of oil to the US after Venezuela, suspended exports by state-owned Petroecuador on Aug. 18 because of protesters in the provinces of Orellana and Sucumbios. The company has since cut its production to 33,167 b/d from 201,000 b/d previously.

Protesters attacked pipelines and pumping machinery and blocked highways in the two provinces in an attempt to force the government to free other protesters held in custody. The dissidents are demanding more jobs and local investments by international oil companies working in that area.

Meanwhile, Royal Dutch Shell PLC said its Nigerian production has been reduced by 14,200 b/d for 3 days because local protestors have surrounded some of its land facilities. Nigeria is Africa's biggest producer of crude.

The production cutbacks and the rocket attack fanned traders' fears of major supply disruptions.

Energy prices
The September contract for benchmark US light, sweet crudes rebounded by $2.08 to $65.35/bbl Aug. 19 on the New York Mercantile Exchange. The October contract increased by $2.02 to $65.79/bbl. On the US spot market, West Texas Intermediate was up by $2.08 to $65.36/bbl. Gasoline for September delivery surged by 4.1¢ to $1.90/gal on NYMEX. Heating oil for the same month gained 3.23¢ to $1.82/gal.

The September natural gas contract escalated by 18.3¢ to $9.11/MMbtu, "driven by a strong rally in crude oil prices and some short-covering [of an excess of open sales contracts] after a 2-day slide," said analysts at Enerfax Daily. "The big story, however, is the change in weather. It looks like the extreme heat of this summer is over."

In London, the October contract for North Sea Brent crude jumped by $1.96 to $64.36/bbl on the International Petroleum Exchange. Gas oil for September was up by $15.25 to $583.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained $1.02 to $57.53/bbl on Aug. 19. So far this year, OPEC's basket price has averaged $48.40/bbl.

Contact Sam Fletcher at [email protected]