Sam Fletcher
Senior Writer
HOUSTON, Dec. 5 -- Predictions of colder weather after a warm November and indications of sustained US economic growth pushed up energy prices Dec. 2 in a continued rally that many expect to spill over into this week.
"The latest National Weather Service forecast calls for below-normal temperatures for most of the eastern two thirds of the nation until Dec. 14. The region from the central and northern plains to New England is forecast to be colder than normal during December," said analysts at Enerfax Daily in a Dec. 5 report. "Heating oil demand in the Northeast is forecast to be 18% above normal through Dec. 7."
Robert S. Morris at Banc of America Securities LLC, New York, said, "The variable that continues to have the greatest impact on commodity prices . . . near term is temperatures, both in the US and Europe." He noted "a 1.5% increase in West Texas Intermediate spot crude oil prices and a more than 15% surge in the 12-region average composite spot natural gas price" during the week ended Dec. 2.
Energy prices
The January contract for benchmark US light, sweet crudes jumped by 85¢ to $59.32/bbl Dec. 2 on the New York Mercantile Exchange. The February contract was up by 86¢ to $60.21/bbl. On the US spot market, WTI at Cushing, Okla., gained 85¢ to $59.33/bbl. Gasoline for January delivery climbed by 4.87¢ to $1.61/gal on NYMEX. Heating oil for the same month increased by 3.33¢ to $1.77/gal.
The January natural gas contract escalated for the fourth consecutive trading session on NYMEX, jumping by 90.4¢ to $13.93/MMbtu on Dec. 2, "a gain of nearly 20% since Thanksgiving on extreme cold weather forecast for this week and speculators again covering short positions [of excess sales contracts]," said Enerfax analysts.
There is "still a lot of uncertainty" about the amounts of natural gas shut in and the cumulative production lost in federal and state waters in Gulf of Mexico and onshore along the Gulf Coast, as well as "demand destruction" in the wake of Hurricanes Katrina and Rita, Morris said. As a result, "consensus expectations for natural gas prices for 2006 might also be too low, depending on winter temperatures."
The US Minerals Management Service said 132 production platforms in the federal waters of the Gulf of Mexico were still without crews as of Dec. 2, with 539,074 b/d of crude and 2.9 bcfd of natural gas still shut in. Cumulative production lost from federal waters since Aug. 26 totaled 96.96 million bbl of crude and 501.2 bcf of natural gas. That's equivalent to 17.7% of the annual crude production and 13.7% of the annual gas production from those waters, MMS said.
In London, the January contract for North Sea Brent crude gained 90¢ to $57.05/bbl on the International Petroleum Exchange. Gas oil for December increased by $10.75 to $507.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained $1.16 to $51.87/bbl on Dec. 2. So far this year, OPEC's basket price has averaged $50.47/bbl.
Contact Sam Fletcher at [email protected].
