Sam Fletcher
Senior Writer
HOUSTON, Dec. 2 -- Energy prices climbed for the second consecutive day with increased projections of colder weather in the northern US.
AccuWeather Inc. predicted heavy snow squalls and whiteouts Friday in the snow belts along the Great Lakes, with gusty winds "from Detroit, Mich., to Dover, Del., and at all locations on either side" that "will make it feel much colder than what the temperature indicates." AccuWeather said, "Next week is when the mother load of arctic air comes down, causing some of the most widespread cold ever during the early days of December." As a result, heating demand in the Northeast US is expected to be 18% above normal through Dec. 7.
Weather drives markets
Ronald J. Barone, a managing director of equity research with UBS Securities LLC, New York, said, "Despite the well-supplied market, weather appears to be firmly in the driver's seat, moving natural gas prices higher or lower with every change in the weather forecast." He noted that Joseph Kelliher, chairman of the Federal Energy Regulatory Commission, recently said that 10% warmer-than-normal temperatures this winter would offset the loss of the Gulf of Mexico natural gas production resulting from hurricanes this year, while 10% colder-than-normal temperatures could double the price effect of lost production.
The US Minerals Management Service said Dec. 1 that 1 offshore drilling rig and 132 production platforms are still idle in the gulf due to the hurricanes, with 547,074 b/d of crude and 2.96 bcfd of natural gas production shut in. Cumulative production lost from federal leases in the Gulf of Mexico since Aug. 26 now total 96.4 million bbl of crude and 498.3 bcf of natural gas.
Meanwhile, officials from the Organization of Petroleum Exporting Countries and the European Union had their second energy dialogue meeting Dec. 2 in Vienna and recommended a study of world refining and a workshop on financial markets. Downstream bottlenecks should be "tackled seriously, for if the downstream is not able to produce the products that the market wants then there is pressure on the light, sweet crudes, which drives up the price of other crudes," said Ahmad Fahad Al-Ahmad Al-Sabah, OPEC's conference president and energy minister of Kuwait.
"Although OPEC believes that solving the problem in the downstream sector is the responsibility of consumer countries, many of our member countries have taken it upon themselves to build additional refineries, both domestically and abroad, with a view to helping solve this problem in the overall interest of the industry," he said. "However, we will continue to urge consumer countries to invest in the downstream sector so as to remove the pressure on product prices."
Energy prices
The January contract for benchmark US light, sweet crudes jumped by $1.15 to $58.47/bbl Dec. 1 on the New York Mercantile Exchange, while the February position gained $1.12 to $59.35/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.15 to $58.48/bbl. Gasoline for January delivery escalated by 6.55¢ to $1.56/gal on NYMEX. Heating oil for the same month advanced by 4.9¢ to $1.74/gal. The January natural gas contract increased by 44¢ to $13.03/MMbtu on NYMEX.
In London, the January contract for North Sea Brent crude gained $1.10 to $56.15/bbl on the International Petroleum Exchange. Gas oil for December increased by $4.50 to $497/tonne.
The average price for OPEC's basket of 11 benchmark crudes escalated by $1.02 to $50.71/bbl Dec. 1.
Contact Sam Fletcher at [email protected].
