Sam Fletcher
Senior Writer
HOUSTON, Sept. 14 -- Oil and gas markets were mixed Sept. 13, with the front-month natural gas contract falling below $11/MMbtu for the first time in 15 days among expectations that recently high energy prices will curb global demand.
However, the recovery of oil and gas production in the Gulf of Mexico may have stalled because of hurricane damage to pipelines and storage facilities, said some industry observers.
Oil leaks reported
Shell Pipeline Co. LP, a unit of Shell Oil Co., Houston, confirmed crude leaks from an aboveground storage unit into a containment dike at a company tank farm in Pilottown, La., and from a 20 in. pipeline in Nairn, La. Damage to the pipeline resulted from a breach in a hurricane protection levee. Damage to the storage tank was apparently caused by the hurricane's strong winds. At last report, workers had recovered more than 6,200 bbl of the estimated 10,000 bbl leaked in Pilottown. The Nairn leak was estimated at 250 bbl, said company officials.
Nairn also is the site of three branches of Shell's Delta pipeline system, which transports crude from the Gulf of Mexico to refineries and Chevron Corp.'s Empire, La., terminal, a major storage facility for Heavy Louisiana Sweet crude. Chevron confirmed 23,000 bbl leaked from an oil tank at that terminal.
The terminal remains closed as workers assess the damage. Meanwhile, restart of some shut-in offshore platforms awaits the reopening of the terminal.
The US Minerals Management Service said Sept. 13 that crews have not yet returned to 87 platforms and 2 drilling rigs in the Gulf of Mexico. Officials reported that 846,720 b/d of oil remain shut-in, or 56.5% of the normal production from those waters. Also, 3.7 bcfd of natural gas is shut-in, or 37.2% of the gulf's normal production. Cumulative production lost to Hurricane Katrina from Aug. 26 through Sept. 13 totals 19.7 million bbl of oil and 95.5 bcf of natural gas.
Crude inventories fall
The Energy Information Administration reported Sept. 14 that commercial US crude inventories plummeted by 6.6 million bbl to 308.4 million bbl during the week ended Sept. 9 as the industry tried to recover from Hurricane Katrina. US gasoline stocks rose by 1.9 million bbl to 192 million bbl, but distillate fuel inventories fell by 1.1 million bbl to 133.3 million bbl in the same period.
Imports of crude into the US dropped by 403,000 b/d to 9.1 million b/d during that week. However, crude input to US refineries inched up by 50,000 b/d to nearly 14.7 million b/d. With many refineries incapacitated by the storm, the system was working at 87.3% of capacity. Still, gasoline production rose substantially while distillate fuel output declined, EIA said.
Energy prices
Prices for benchmark US light, sweet crudes fell by 23¢ each to $63.11/bbl for the October contract and $63.78/bbl for the November contract Sept. 13 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also lost 23¢, to $63.12/bbl. However, heating oil for October delivery escalated by 2.59¢ to $1.84/gal on NYMEX. Gasoline for the same month was up by 1.79¢ to $1.89/gal.
The October natural gas contract fell by 26.8¢ to $10.76/MMbtu on NYMEX, due to "lower crude oil prices, no threat of storms to production in the Gulf of Mexico, and air conditioner demand that is beginning to fade for the season," said analysts at Enerfax Daily.
In London, the October contract for North Sea Brent crude was down by 19¢ to $61.61/bbl on the International Petroleum Exchange. But the October gas oil contract increased by $6.50 to $575.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dropped 91¢ to $55.82/bbl on Sept. 13.
Contact Sam Fletcher at [email protected].
