Sam Fletcher
Senior Writer
HOUSTON, Dec.6 -- Crude futures prices briefly topped $60/bbl Dec. 5, but natural gas futures declined in profit-taking as a winter cold front moved into the main US gas and heating oil markets in the Midwest and Northeast.
By the close of trading in New York, the first big snow storm of the season was beginning to blanket Washington, DC, and was expected to hit New England on Dec. 6. Several industry analysts said recently they expect weather to continue to drive market prices through the rest of this winter (OGJ Online, Dec. 5, 2005).
"Temperatures are falling to as much as 12º below normal, according to private forecasters. Some forecasters have predicted the cold snap could last until the middle of the month, potentially eroding heating oil stockpiles that are much higher than they were a year ago," said analysts at Enerfax Daily.
J. Marshall Adkins in the Houston office of Raymond James & Associates Inc. said fundamentals also are supporting prices. "Even assuming normal temperatures, our winter natural gas supply and demand forecasts suggest additional price rationing must occur in order to start next spring's injection season with sufficient inventory levels," he said.
Meanwhile, the US Minerals Management Service said 132 production platforms in the federal waters of the Gulf of Mexico were still without crews Dec. 5, with 509,270 b/d of crude and 2.7 bcfd of natural gas still shut in. Cumulative production lost Aug. 26-Dec. 5 from federal waters as a result of Hurricanes Katrina and Rita totaled 98.5 million bbl of crude and 509.4 bcf of natural gas, equivalent to nearly 18% of the annual crude production and almost 14% of the annual gas production from those waters, MMS said.
The US Department of Energy said Dec. 5 that seven gas processing plants in Louisiana, each with capacity of 100 MMcfd or more, still are inactive but that an unspecified number of those are expected to be operating within 4 weeks.
The Louisiana Department of Natural Resources said 114,014 b/d of crude production, or 56.1% of prehurricane capacity; and 1.4 bcfd of natural gas production, or 62.7% of previous capacity, have been restored in 38 south Louisiana parishes. Of the 55 pipeline operators in those parishes, 30 reported their facilities are still shut in, while 17 have only partially operable systems.
Energy prices
The January contract for benchmark US sweet, light crudes traded as high as $60.80/bbl Dec. 5 on the New York Mercantile Exchange before closing at $59.91/bbl, up by 59¢ for the day. The February contract gained 64¢ to $60.85/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by 59¢ to $59.92/bbl. Gasoline for January delivery lost 2.15¢ to $1.59/gal on NYMEX. However, heating oil for the same month increased by 1.76¢ to $1.79/gal. "Heating demand in New York City will peak [Dec. 9] when it will be 52% higher than normal," said Enerfax analysts. "Heating demand in the Northeast is expected to be 19% above normal through Dec. 12."
The January natural gas contract traded at $13.61-14.45/MMbtu Dec. 5 on NYMEX, but despite the surge of cold weather, late profit-taking cut the closing price to $13.66/MMbtu, down 27.1¢ for the day.
The Raymond James winter natural gas supply-demand scorecard "suggests that the gas markets will be undersupplied by approximately 1.6 bcfd, which equates to 2-3% of estimated winter demand," Adkins said. "As such, natural gas prices will likely remain high enough to ration (or displace) 1.6 bcfd of demand. If the colder-than-normal temperature forecasts hold true, then even more demand destruction and, thus, higher natural gas prices will be required."
In London, the January contract for North Sea Brent crude climbed by 68¢ to $57.73/bbl on the International Petroleum Exchange. The December contract for gas oil increased by $12.75 to $520.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 85¢ to $52.72/bbl on Dec. 5.
Contact Sam Fletcher at [email protected].
