Sam Fletcher
Senior Writer
HOUSTON, Oct. 19 -- Energy prices fell sharply Oct. 18, eliminating much of the gains from the previous trading session, as Hurricane Wilma appeared to be tracking toward Florida and away from storm-ravaged offshore oil and natural gas facilities in the central and western Gulf of Mexico.
Prices dropped temporarily ahead of Hurricanes Katrina and Rita, when the danger to offshore operations appeared to lessen in the early stages of those storms. In Katrina's case, energy prices fell Aug. 26, a Friday, as that storm threatened Florida. But Katrina then roared into the Gulf of Mexico and blew ashore in Louisiana on Aug. 29, catching traders by surprise with the damage it inflicted on petroleum production, processing, and transportation facilities.
Hurricane Wilma increased in power Oct. 19 to become the third Category 5 storm of the season behind Katrina and Rita. Moreover, Wilma registered the lowest recorded barometric pressure of any Atlantic basin hurricane this season, making it the most intense storm of the year. The National Hurricane Center reported a barometric pressure reading of 892 millibars for Wilma, the same level as an unnamed hurricane that devastated the Florida Keys in 1935.
Early Oct. 19, Wilma was in the western Caribbean 170 miles south-southwest of Grand Cayman Island and 365 miles southeast of Cozumel, Mexico, moving west-northwest at 8 mph. It is expected to make landfall in southwestern Florida by the weekend.
Inventories
The Energy Information Administration reported Oct. 19 that crude stocks increased sharply in the week ended Oct. 14, usually a bearish indicator of US demand among traders. Commercial US inventories of crude jumped by 5.6 million bbl to 312 million bbl, while gasoline stocks gained 2.9 million bbl to 195.7 million bbl in the same period. However, distillate fuel inventories fell by 1.9 million bbl to 122.7 million bbl with losses of both diesel fuel and heating oil.
Imports of crude into the US jumped by 588,000 b/d to 9.2 million b/d during that week. Input into US refineries soared by 702,000 b/d to 13.3 million b/d as more Gulf Coast refineries came back on stream after being shut down by recent hurricanes. The US refining system was up to 79.1% of capacity during the week ending Oct. 14.
Recovery still slow
The oil and gas industry is still recovering slowly from the damage inflicted by Hurricanes Katrina and Rita. Crews have not returned to 2 rigs and 216 production platforms in the Gulf of Mexico, and 982,011 b/d of crude and 5.3 bcfd of natural gas remain shut in. That's equivalent respectively to 65.5% of the crude and 53.5% of the gas normally produced in the gulf, said the Minerals Management Service. Cumulative production lost from federal leases in the gulf since Aug. 26 now totals 61.6 million bbl of crude and 310.8 bcf of natural gas.
Meanwhile, the MMS gulf region adjudication office is scheduled to reopen in New Orleans Oct. 20 after being forced out of that city by Katrina. "Customers may experience delays in actions that are approved by the adjudication unit because of workload issues and the backlog of work now received from the closure of the office as a result of the hurricanes," said Chris Oynes, gulf regional director with MMS.
The Louisiana Office of Conservation reported a slight increase in resumed production from oil and gas fields onshore and in state waters in 38 parishes, up to 765 MMcfd Oct. 18, from 756.6 MMcfd previously. However, 47.2% of the oil and gas wells in that region still are shut in, and the office said it has not received any information on 25.7% of those. Prestorm production from those parishes totaled 2.2 bcfd.
Shell Oil Co. said workers are completing final site assessments and repairs required to initiate the start-up sequence this week of Motiva Enterprises LLC's 275,000 b/d refinery in Port Arthur, Tex. That restart period will continue next week as equipment, systems, and processes become operable and production increases toward normal rates, officials said. Shell said its 340,000 b/d Deer Park, Tex., facility is now at normal operation.
Energy prices
The November contract for benchmark US light, sweet crudes fell by $1.16 to $62.90/bbl Oct. 18 on the New York Mercantile Exchange. The December contract lost $1.17 to $62.40/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.16 to $63.21/bbl. Gasoline for November delivery dropped 8.01¢ to $1.74/gal on NYMEX. Heating oil for the same period declined by 4.91¢ to $1.93/gal.
The November natural gas contract lost 46.6¢ to $13.42/MMbtu on NYMEX, "pressured by steady selling as computer models shifted Hurricane Wilma's track towards Florida and away from central Gulf of Mexico oil and natural gas facilities," said analysts at Enerfax Daily.
In London, the December contract for North Sea Brent crude lost $1.29 to $59.28/bbl on the International Petroleum Exchange. The November contract for gas oil fell by $11.50 to $590.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes declined by 83¢ to $54.41/bbl Oct. 18.
Contact Sam Fletcher at [email protected].
