Sam Fletcher
Senior Writer
HOUSTON, Mar. 21 -- Energy prices fell Mar. 20 as traders shrugged off additional disruption of crude supplies from Nigeria in expectation of additional builds in already record-high US inventories.
Italy's Eni SPA, the fourth largest European oil company, said it has curtailed 13,000 b/d of crude production in Nigeria pending repairs to a pipeline in the Niger Delta, managed by its Nigerian Agip Oil Co., that was bombed by saboteurs Mar. 17. The 13,000 b/d was Eni's share of crude transported by the 24-in. pipeline, which has a capacity of 75,000 b/d. Repairs are scheduled to start this week and are expected to be completed by the end of March, said Eni officials.
Royal Dutch Shell PLC earlier shut in 455,000 b/d, 20% of Nigeria's total crude production, following attacks on oil facilities and the kidnapping of nine workers in the Niger Delta. Nigeria's oil ministry subsequently said it planned to resume production of 75% of that crude within 2 weeks (OGJ Online, Mar. 9, 2006).
Meanwhile, China and Russia are pushing for a diplomatic resolution of the Iranian nuclear issue after recent Western attempts to authorize the United Nations Security Council action against Iran were thwarted. However, President George W. Bush reiterated that Washington is prepared to use military force against Iran if necessary to maintain world peace and protect America's strong ally, Israel.
Rockies prices suffer
Operators in Montana, North Dakota, and northern Wyoming said they were notified that they will receive $22-25/bbl less for their oil in March and possibly longer. "It's not a pretty picture," said Don Likwartz, oil and gas supervisor for the Wyoming Oil & Gas Conservation Commission, who blamed the lack of pipeline capacity in that region.
Kinder Morgan Inc. last April expanded the capacity of a pipeline that moves crude and synthetic crude from Hardisty, Alta., to Casper, Wyo., to 282,000 b/d from 181,000 b/d. Meanwhile, Cedar Creek Anticline production increased by 50% in 1 year to 70,000 b/d last September. "As a result, both the Enbridge, ND, line and the Platte River Pipeline from Casper to Wood River, Ill., became apportioned during 2005," Likwartz said.
"Next Suncor [Energy (USA) Inc.]'s Denver refinery had two fires in January and then was shut down for maintenance and repairs," said Likwartz. Suncor last June acquired Valero Energy Corp.'s 30,000 b/d refinery adjacent to Suncor's existing refinery in Commerce City, Colo., just outside of Denver. The company was to integrate the two into a 90,000 b/d facility.
"All of these events caused the differential for Wyoming sweet crude vs. West Texas Intermediate to progressively [increase] from minus-$1/bbl in 2004 to minus-$5/bbl in 2005 through November to minus-$7-12/bbl over the next 3 months to minus-$26.50/bbl in March," Likwartz told OGJ. "The differential improved by $5/bbl last week, and we hope that it'll drop back to minus-$7-12/bbl once Suncor's refinery is back to full capacity."
Still, he said, "With continuing projected increases in syncrude production, Wyoming sweet crude won't see a minus $1-5/bbl differential vs. WTI until another crude pipeline is built or the Pony Express gas pipeline is [converted] to crude [transport], which was what it was originally constructed to handle. However, this reversal can't occur until the new Rockies Express gas pipeline is constructed into Missouri, which is currently projected to happen the end of 2007."
Energy prices
The April contract for benchmark US sweet, light crudes dropped $2.35 to $60.42/bbl Mar. 20 on the New York Mercantile Exchange. The May contract lost $2.24 to $61.96/bbl. On the US spot market, WTI was down by $2.35 to $60.43/bbl. Heating oil for April delivery dropped 3.96¢ to $1.74/gal. Gasoline for the same month declined 3¢ to $1.83/gal. The April natural gas contract fell 21.8¢ to $6.84/MMbtu.
In London, the May IPE contract for North Sea Brent crude fell by $1.92 to $61.34/bbl. The April gas oil contract lost $10.50 to $555/tonne, wiping out all gains from the previous session.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dropped $1.15 to $57.32/bbl on Mar. 20.
Contact Sam Fletcher at [email protected].
