MARKET WATCH Energy prices continue to fall in profit-taking

Dec. 16, 2005
Energy prices fell in profit-taking on the New York market Dec. 15 as traders ignored predictions of colder-than-normal US weather over the weekend.

Sam Fletcher
Senior Writer

HOUSTON, Dec. 16 -- Energy prices fell in profit-taking on the New York market Dec. 15 as traders ignored predictions of colder-than-normal US weather over the weekend and focused instead on estimates of warmer-than-normal weather at the end of December.

The Energy Information Administration reported Dec. 15 the withdrawal of 202 bcf of natural gas from US underground storage in the week ended Dec. 9. That was the biggest outtake ever of natural gas from storage this early in the winter heating season. It compared with withdrawals of 59 bcf the previous week and 61 bcf during the same period a year ago. US gas storage now stands at 2.964 tcf, down by 195 bcf from year-ago levels but 107 bcf above the 5-year average (OGJ Online, Dec. 15, 2005).

"Given overall market dynamics so far this week, we estimate another significant withdrawal upon the release of the next EIA report," said Ronald J. Barone, managing director of equity research for the Natural Gas & Electric Utilities Group of UBS Securities LLC, New York. "When compared to last year's 123 bcf withdrawal and the 5-year average withdrawal of 124 bcf, we expect to see a substantial increase in the year-over-year deficit and the 5-year surplus once again cut substantially. Given current weather forecasts and year-earlier withdrawal comparisons, we believe the year-over-year deficit will be between 200-250 bcf by early January."

Meanwhile, the Louisiana Department of Natural Resources said Dec. 15 that 58.8% of the crude production, or 119,451 b/d, and 66.5% of the natural gas production, or 1.5 bcfd, have been restored onshore and in state waters of 38 south Louisiana parishes after being shut in by Hurricanes Katrina and Rita. Of the 55 onshore crude oil pipeline operators in those hurricane-affected parishes, only 8 have completely reopened their facilities, 17 have part of their systems operational, and 30 said they're still shut in.

The US Minerals Management Service had 126 offshore platforms in the Gulf of Mexico still listed as evacuated 3-4 months after Rita and Katrina hit the oil and gas producing areas of the central gulf. As of Dec. 15, it said, 28.4% of daily crude production, or 426,282 b/d, and 22.3% of daily natural gas production, or 2.2 bcfd, were still shut in on federal leases in the gulf.

Cumulative gulf production lost Aug. 28-Dec. 15 totaled 102.97 million bbl of crude and 532.9 bcf of natural gas. That is equivalent to 18.8% of the crude and 14.6% of the natural gas produced annually from federal leases in the Gulf of Mexico.

Energy prices
The January natural gas contract fell by 89.8¢ to $13.78/MMbtu Dec.15 on the New York Mercantile Exchange, its second consecutive day of losses after hitting an all-time high of $15.78/MMbtu before closing at a record $15.38/MMbtu on Dec. 13. Expectations that current cold weather would moderate overpowered the "very bullish" EIA report, said analysts at Enerfax Daily. "The 1-2 week forecasts are still looking for below-normal temperatures," they said. "Home-heating demand in the Northeast will be 9% above normal through Dec. 22."

The January contract for benchmark US light, sweet crudes dropped 86¢ to $59.99/bbl Dec. 15 on NYMEX, while the February contract fell by 77¢ to $61.10/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 86¢ to $60/bbl. Heating oil for January delivery lost 5.77¢ to $1.79/gal on NYMEX. Gasoline for the same month dipped by 2.39¢ to $1.62/gal.

In London, however, the January contract for North Sea Brent crude increased by 25¢ to $59.85/bbl on the International Petroleum Exchange. Gas oil for January was up by $1.25 to $543.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes slipped by 18¢ to $54.44/bbl on Dec. 15.

Contact Sam Fletcher at [email protected].