Sam Fletcher
Senior Writer
HOUSTON, Aug. 11 -- Energy prices soared to new highs on Aug. 10 as traders ignored a build in US crude inventories and worried instead about possible supply disruptions, including international concern over Iran's nuclear program, tightness of US refining capacity, and threats from the Atlantic hurricane season.
"The Iranian nuclear issue has been lurking in the shadows for a considerable time," said Paul Horsnell with Barclays Capital Inc. in London. "It has now come further to the fore in a market [that] is naturally concerned by potential supply outages, a market that has very little remaining slack."
He said, "Refining remains the key bottleneck within the oil system, and the frailty of the US system in particular when being run to, and sometimes beyond, sustainable limits is a source of upside price risk."
BP PLC shut down parts of its 446,500 b/d Texas City, Tex., refinery for inspection Aug. 10 after a leak in a hydrotreater spilled 100 bbl of gas oil and released 100 pounds of hydrogen sulfide into the air. However, officials said production at that facility would not be affected.
Meanwhile, Total SA is still negotiating with local communities in Nigeria after production from its Obagi oil and natural gas field was shut in more than a week ago by civil unrest. That field previously produced 35,000 b/d of oil equivalent and 6 million cu m/day of natural gas (OGJ Online, Aug. 5, 2005).
US inventories
The Energy Information Administration said Aug. 10 that commercial US crude inventories escalated by 2.8 million bbl to 320.8 million bbl during the week ended Aug. 5, which is "well above the average range for this time of year." Distillate fuel stocks increased by 2.6 million bbl to 129.9 million bbl during the same period, but gasoline inventories fell by 2.1 million bbl to 203.1 million bbl.
"After their sharper-than-normal declines in recent weeks, gasoline inventories are now somewhat too low for comfort in absolute terms, and they are far too low for comfort in terms of days of forward cover," Horsnell said.
Imports of crude into the US rose by 101,000 b/d to 11.1 million b/d during the same period, the second highest weekly average ever, said EIA officials. However, inputs of crude into US refineries declined by 64,000 b/d to nearly 16 million b/d with refineries operating at 95% of capacity. Still, production of both gasoline and distillate fuel increased.
Energy prices
The September contract for benchmark US sweet, light crudes hit an all-time high of $65/bbl for intraday trading of a front-month contract on the New York Mercantile Exchange. It closed at $64.90/bbl—another record—up by $1.83 for the day on Aug. 10. The October position escalated by $1.90 to $66.06/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.82 to $64.90/bbl.
"The US economy at least does seem to have learned to cope with $50 oil and is in the process of attempting to adjust to higher levels," Horsnell said.
Gasoline for September delivery jumped by 7.39¢ to $1.90/gal on NYMEX, while heating oil for the same month escalated by 6.22¢ to $1.84/gal. The September natural gas contract soared by 42.2¢ to $9.07/MMbtu, marking the first time a front-month contract has exceeded the $9 level since November of last year. Meanwhile, natural gas contracts for January-March 2006 topped $10/MMbtu in intraday trade Aug. 10 on NYMEX.
EIA reported Aug. 11 an injection of 43 bcf of natural gas into US underground storage in the week ending Aug. 5. That compared with injections of 37 bcf the previous week and 72 bcf during the same period last year. Storage now stands at 2.463 tcf , up by 21 bcf from a year ago and 149 bcf above the 5-year average.
In London, the September contract for North Sea Brent crude shot up by $2.01 to $63.99/bbl on the International Petroleum Exchange. Gas oil for August gained $8.50 to $567/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 85¢ to $57.30/bbl on Aug. 10.
Contact Sam Fletcher at [email protected]
