Sam Fletcher
Senior Writer
HOUSTON, Nov. 2 -- Futures prices for crude and petroleum products stabilized somewhat on Nov. 1 as traders looked for new market signals from weather predictions and supply reports.
The Energy Information Administration said Nov. 2 that commercial US crude inventories increased by 2.7 million bbl to 319.1 million bbl during the week ended Oct. 28, just prior to the official start Nov. 1 of the heating season. Gasoline stocks rose by 1 million bbl to 196.9 million bbl during the same period. However, distillate fuel inventories dipped by 200,000 bbl to 120.9 million bbl, with a decline in heating oil outweighing an increase in diesel fuel.
US imports of crude increased by 103,000 b/d to 10.1 million b/d during the same week. Crude input into US refineries gained 346,000 b/d to 13.9 million b/d. The system was operating at 82.5% of capacity as more Gulf Coast refiners were able to begin operating again. The US Department of Energy reported 804,000 b/d of refining capacity was still shut down as a result of storm damage along the Gulf Coast at the end of October.
ExxonMobil Corp. was reported to be restarting its 187,200 b/d Chalmette, La., refinery, expecting full production by mid-November. Still shut down are two Louisiana refineries damaged by Hurricane Katrina: ConocoPhillips's 247,000 b/d Belle Chasse plant and Murphy Oil's 120,000 b/d Meraux refinery, expected to start up in the first quarter of 2006. BP's 437,000 b/d Texas City, Tex., refinery, shut down before Hurricane Rita, also remains down. BP expects gasoline production to resume in mid-December and full production to resume by yearend or early in 2006.
Margins decline
"During the past few weeks, US refining margins have declined due to demand concerns and the recovery of Gulf Coast production facilities," said analysts at Friedman, Billings, Ramsey & Co. Inc. in Arlington, Va. "However, with gasoline consumption continuing to improve (plus 2% above year-ago levels over the past 4 weeks), imports expected to recede from recent record highs, seasonally greater heating oil demand during the winter months, and inventories 6% below average on a demand-adjusted basis, we believe that margins should improve over the coming weeks."
Traders are watching the weather in the Northeast and Midwest US as a gauge of winter demand for natural gas and heating oil.
"Historically, the last week of October is when temperatures experience a large drop and heating oil consumption rises. New England is the key market to watch since the region comprises approximately 80% of heating oil needs in the US (the majority of the country uses natural gas)," said Friedman, Billings, Ramsey & Co. "Over the past 4 years, heating oil demand has jumped an average of 160,000 b/d (14%) during this calendar week, while degree days in New England have risen an average of 29%. With colder temperatures on the way, heating oil consumption should materially increase over the coming months."
Energy prices
The December contract for benchmark US light, sweet crudes inched up by 9¢ to $59.85/bbl Nov. 1 on the New York Mercantile Exchange. The January position advanced by 15¢ to $60.54/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 9¢ to $59.86/bbl. Gasoline for December delivery gained 1.35¢ to $1.60/gal on NYMEX. However, heating oil for the same month lost 1.89¢ to $1.81/gal.
The December natural gas contract fell by 34.5¢ to $11.86/MMbtu, marking the first decline of a front-month contract below $12/MMbtu since mid-September. That market was undermined by predictions that above-normal temperatures in the northern half of the US will spread south, "blanketing the eastern two thirds of the nation, starting midweek," said analysts at Enerfax Daily.
In London, the December North Sea Brent contract escalated by 27¢ to $58.37/bbl on the International Petroleum Exchange. Gas oil for November lost $6.25 to $545.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes slipped by 8¢ to $52.91/bbl on Nov. 1.
Contact Sam Fletcher at [email protected].
