Sam Fletcher
Senior Writer
HOUSTON, Sept. 20 -- Energy prices soared Sept. 19 as natural gas futures closed at a record high on the New York Mercantile Exchange on market fears that Tropical Storm Rita will build into a hurricane that could follow the same destructive path through the central Gulf of Mexico as Hurricane Katrina.
The new price spike virtually wiped out recent losses for all energy commodities tracked by OGJ Online in the New York and London markets, raising prices to the same range as when Katrina went ashore east of New Orleans on Aug. 29.
Early on Sept. 20, Rita was 100 miles east-southeast of Key West, Fla., with maximum sustained winds of 70 mph, moving west-northwest at 15 mph. The National Hurricane Center and other meteorologists expect the storm to build into a hurricane in the Gulf of Mexico and make landfall near Galveston, south of Houston, by Sept. 23-24.
Hurricane movements are so erratic, however, that Rita could make landfall anywhere from Southeast Louisiana to northern Mexico, officials said.
The storm threat renewed evacuation of offshore facilities in the Gulf of Mexico. The US Minerals Management Service said 5 rigs and 83 platforms were evacuated as of Sept. 19, compared with 2 rigs and 84 platforms on Sept. 16 (OGJ Online, Sept. 19, 2005). Production of 837,648 b/d of crude and 3.375 bcfd of natural gas was shut in Sept. 19, compared with 840,921 b/d of crude and 3.383 bcfd of gas on Sept. 16. The cumulative amount of Gulf of Mexico production lost Aug. 16-Sept. 19 totaled 24,835,216 bbl of crude and 115.9 bcf of natural gas
OPEC's surprise
Meanwhile, ministers of the Organization of Petroleum Exporting Countries on Sept. 20 surprised traders and politicians who were expecting the cartel to hike production by 500,000 b/d to 28.5 million b/d at their meeting in Vienna. Instead, OPEC merely promised to release its spare production capacity, reported at 2 million b/d, for a period of 3 months, starting Oct. 1 if necessary, while keeping its current quota unchanged.
OPEC production currently is estimated at 28.3 million b/d—30.2 million b/d, including Iraq. Members of the group noted that high production level "has led to a build-up [among consuming countries] in inventory levels, especially of crude, which now stand well above their 5-year average, sufficient to ease concerns in the market about potential supply disruptions, such as those witnessed following Hurricane Katrina."
Various analysts previously said there was no need for OPEC to increase production, especially of sour crude, when the real problem was the lack of refining capacity. Four Gulf Coast refineries remained shut down—Chevron Corp. in Pascagoula, Miss.; ConocoPhillips, Belle Chasse, La.; ExxonMobil Corp., Chalmette, La; and Murphy Oil Corp., Meraux, La. They have combined capacity of 900,000 b/d, or 5% of the US total (OGJ Online, Sept. 13).
Chevron has repaired a hurricane-damaged product berth at its Pascagoula refinery and is now transporting products from that site to its Collins, Miss., terminal and to the Plantation Pipeline for delivery to the southeastern US. The company received 11.5 million gal of regular grade gasoline Sept. 16 from a European supplier and is prepared to import additional shipments of gasoline, diesel, and jet fuel as needed.
Chevron said it continues to assess damage to the 325,000 b/d Pascagoula refinery and expects a processing train, involving a crude unit and associated conversion equipment, to start up in mid-October. It said the refinery might resume full operation in mid-November.
More than 1,000 Chevron employees and contractors are working at the facility, to which electrical power has been fully restored. Chevron said a breached section of a dike surrounding the facility had been repaired. Industrial water service has been restored.
Energy prices
The October natural gas contract spiked by $1.52—the biggest 1-day gain ever—to a record closing price of $12.66/MMbtu on NYMEX, just pennies below its intraday high of $12.70/MMbtu in that session. The market was driven by predictions that Hurricane Rita would enter the Gulf of Mexico by midweek, said analysts at Enerfax Daily. They added, "Hot weather over much of the nation also helped back buying in the cash [spot natural gas] market to meet strong air conditioning demand."
The October contract for benchmark US sweet, light crudes flew up by $4.39 to close at $67.39/bbl, also the biggest dollar gain in one session for a front-month contract in the 22 years that NYMEX has been trading crude futures and the steepest 1-day percentage escalation in 4 years. The November contract gained $4.17 to $67.51/bbl. On the US spot market, West Texas Intermediate was up by $4.39 to $67.40/bbl.
Gasoline for October delivery jumped by 25.76¢ to $2.04/gal on NYMEX. Heating oil for the same month climbed by 20.14¢ to the same level of $2.04/gal.
In London, the November contract for North Sea Brent crude rose by $3.80 to $65.61/bbl on the International Petroleum Exchange. Gas oil for October shot up by $48.50 to $621.50/tonne.
The average price for OPEC's basket of 11 benchmark crudes gained 94¢ to $57.56/bbl on Sept. 19.
Contact Sam Fletcher at [email protected].
