Sam Fletcher
Senior Writer
HOUSTON, Sept. 8 -- Energy prices continued to spiral down with crude futures falling under $65/bbl Sept. 7 on the New York Mercantile exchange amid reports of continued recovery of Gulf of Mexico production and emergency oil supplies being released to markets.
"About 90% of gulf oil production could return to the market in 1 month, if refineries, processing plants, pipelines, and other onshore infrastructure are in operation to receive, prepare, and transport it to the consumer," said Asst. Sec. for Land and Minerals Management Rebecca Watson in Sept. 6 testimony before the Senate Energy and Natural Resources Committee.
However, the condition of many underwater pipelines in the gulf is still unknown and some fear that may handicap production recovery.
The US Minerals Management Service said Sept. 7 that work crews have not yet returned to 16 offshore rigs and 163 production platforms in the gulf and that 860,568 b/d of oil and 4.04 MMcfd of natural gas remained shut in. That amounts to 57.4% of the oil and 40.4% of the natural gas normally produced daily from the gulf. The cumulative amount of production lost following Hurricane Katrina during Aug. 26-Sept. 7 totaled 13.6 million bbl of crude and 71.7 bcf of natural gas.
US inventories
Meanwhile, the US Energy Information Administration said Sept. 8 that commercial US crude inventories plummeted by 6.4 million bbl to 315 million bbl during the week ended Sept. 2, primarily as a result of production and imports disrupted by Hurricane Katrina. Still, US crude inventories "remain well above the upper end of the average range for this time of year," EIA reported.
US gasoline stocks fell by 4.3 million bbl to 190.1 million bbl in the same period, below the average range. Distillate fuel inventories declined by 800,000 bbl to 134.4 million bbl, with a drop in diesel fuel more than offsetting a slight increase in heating oil.
With shipments disrupted by the storm, crude imports into the US fell by 932,000 b/d to 9.5 million b/d last week. The input of crude into US refineries plunged by 1.6 million b/d to 14.6 million b/d, with refineries operating at 86.8% of capacity. Some Gulf Coast refineries have not yet resumed production, and some are working at limited capacity because of damage from Hurricane Katrina.
EIA lowered its projections of US demand for oil in the fourth quarter by 140,000 b/d to 20.97 million b/d, primarily because of recent high prices. However, the administration still is projecting world demand for crude at 86.4 million b/d in the fourth quarter, up by 2.2 million b/d from a year ago.
In other news, Norway's crude production declined by 61,000 b/d to 2.5 million b/d in August, primarily as a result of planned maintenance schedules.
Energy prices
The October contract for benchmark US sweet, light crudes fell by $1.59 to $64.37/bbl Sept. 7 on NYMEX, the lowest closing price for a front-month contract since Aug. 23. The November contract lost $1.68 to $65.03/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.59 to $64.38/bbl. Heating oil for October delivery dropped 9.2¢ to $1.96/gal on NYMEX. Gasoline for the same month slipped by 3.28¢ to $2.02/gal.
The October natural gas contract plunged by 45.6¢ to $11.20/MMbtu "on a sharply cash [natural gas spot] market and crude oil prices as mild weather made for weaker demand across much of the nation," said analysts at Enerfax Daily. "Some traders predicted Hurricane Katrina would reduce demand for fuel and electricity in the areas it hit, countering some production losses."
EIA reported Sept. 8 the injection of 36 bcf of natural gas into US underground storage in the week ended Sept. 2. That was above the consensus of Wall Street analysts but down from 58 bcf the previous week and 80 bcf in the same period last year. US natural gas storage now stands at 2.7 bcf, down by 95 bcf from year-ago levels but 95 bcf above the 5-year average.
In London, the October contract for North Sea Brent crude lost $1.78 to $62.89/bbl on the International Petroleum Exchange. Gas oil for September was down by $10.50 to $621.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes declined by 62¢ to $58.43 on Sept. 7.
Contact Sam Fletcher at [email protected].
