Sam Fletcher
Senior Writer
HOUSTON, Mar. 14 -- Energy prices shot up Mar. 13, far outstripping losses from the Mar. 10 trading sessions, as forecasts of colder weather in the northern US renewed traders' worries about a possible disruption of crude exports from Iran.
The United Nations Security Council is scheduled to meet this week to discuss possible trade sanctions against Iran for refusing to curb nuclear research, which might be a front for the manufacture of atomic weapons. After 3 years of failed negotiations and inspections, the International Atomic Energy Agency referred the matter to the Security Council on Mar. 8 (OGJ Online, Mar. 13, 2006).
Meanwhile, weather forecasts for the northern US have turned colder, with below-average temperatures generally expected Mar. 15-24. But in the northeastern US, which accounts for 80% of US heating oil consumption, temperatures are expected to be 22% above normal through Mar. 20, said Weather Derivatives Inc.
Nevertheless, said analysts at Enerfax Daily, "Natural gas in storage will start the injection season in April with by far the most gas ever already in the ground, thereby depressing fresh storage demand."
IEA reduces forecast
The International Energy Agency on Mar. 14 reduced its 2006 global oil demand growth forecast by 290,000 b/d to 1.49 million b/d, or 1.7%. That reduction was triggered by the economic effect of high prices for petroleum products in Southeast Asia, particularly Indonesia.
The cut came as no surprise, said Jacques Rousseau at Friedman, Billings, Ramsey & Co. Inc., Arlington, Va. "We had been expecting such a revision, as the IEA's prior forecast appeared too optimistic, given that last year's demand increase was only 1 million b/d, forecasts are similar for both 2005 and 2006 global GDP [gross domestic product], and because we believe that sustained high crude oil prices should slow consumption, especially in non-OECD [Organization for Economic Cooperation and Development] regions," he said.
"Although fundamentals are softening, the primary reason crude oil prices have increased over the past few years (the lack of spare capacity in both the upstream and the downstream) have not changed," Rousseau said.
IEA lowered its assessment of North American demand by 100,000 b/d because of reduced use of fuel oil as the result of switching dual-fuel boilers to less expensive natural gas. It cut its non-OPEC global crude oil supply growth outlook by 155,000 b/d, primarily because of weaker former Soviet Union and African levels. IEA now calls for a 1.2 million b/d increase in non-OPEC supply, driven by production growth in the former Soviet Union, Africa, and Latin America. "This is well above the 850,000 b/d 5-year historical average and could be further reduced later in the year, in our view," said Rousseau.
IEA raised its 2006 "call on OPEC" (the amount of crude oil that the cartel will need to produce to balance global supply and demand) to 29 million b/d, just below estimated sustainable production capacity of 30 million b/d (excluding Iraq). "However, this includes the addition of Venezuelan heavy oil production into the analysis," Rousseau said.
Energy prices
The April contract for benchmark US sweet, light crudes jumped by $1.81 to $61.77/bbl Mar. 13 on the New York Mercantile Exchange. The May contract escalated by $1.83 to $63.67/bbl. Gasoline for April delivery climbed by 5.52¢ to $1.74/gal. Heating oil for the same month gained 5.32¢, also to $1.74/gal on NYMEX. The April natural gas contract continued to climb, up by 36.1¢ to $7.01/MMbtu.
In London, the April IPE contract for North Sea Brent crude increased by $1.37 to $62.20/bbl. The April gas oil contract climbed by $11.25 to $543/tonne.
The average price for OPEC's basket of 11 benchmark crudes inched up by 23¢ to $56.41/bbl on Mar. 13.
Contact Sam Fletcher at [email protected].
