By OGJ editors
HOUSTON, June 23 -- Crude oil prices rose a second consecutive day following inventory reports that US gasoline supplies increased less than expected and upon reports that Iran will wait until August to respond about a proposal to end a dispute about its nuclear program.
The US Energy Information Administration said gasoline stocks edged up by 300,000 bbl to 213.4 million bbl during the week ended June 16, primarily because of growing demand and reduced imports of gasoline stocks and blends (OGJ Online, June 22, 2006).
Meanwhile, the July natural gas contract dropped 14.9¢ to $6.439/MMbtu June 22 on the New York Mercantile Exchange.
The natural gas price declined upon EIA reports of an injection of 79 bcf in underground storage for the week ended June 16. EIA reported a 77 bcf injection for the previous week, 80 bcf for the same week last year, and a 5-year average injection of 93 bcf for the week.
Ronald J. Barone, UBS Securities LLC managing director of gas and electric utilities, said storage operators have begun notifying customers of injection limits because current storage injection rates are beginning to test capacity.
"El Paso's ANR Pipeline Co. and Southern Natural Gas Co., for example, recently moved to limit injections for some interruptible customers and warned that storage availability could be further curtailed," Barone said in a June 23 research note. "The peaking capacity paints an interesting fundamental picture for gas prices."
He calculates that the industry will require an injection pace of 7.11 bcfd to reach 3.4 tcf of gas in underground storage by Nov. 1.
"We view this as bearish when compared with the 9.2 bcfd actual injection rate last year and the 10.67 bcfd 5-year average," Barone said. "However, natural gas consumption in the summer months has increased in recent years due to new gas-fueled generation capacity, and the US gas production capacity has decreased. Moreover, fuel-switching power generation facilities will burn natural gas this summer as (unlike the past few summers) it is substantially less expensive than No. 2 or No. 6 oil."
Energy prices
The August contract for benchmark US sweet, light crudes gained 51¢ to $70.84/bbl June 22 on NYMEX. The September contact climbed 70¢ to $71.73/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., dropped by 21¢ to $70.49/bbl.
Gasoline for July delivery escalated by 5.2¢ to $2.118/gal on NYMEX. Heating oil for the same month increased by 3.47¢ to $1.97/gal.
In London, the August IPE contract for North Sea Brent crude increased by 78¢ to $69.95/bbl. The July gas oil contract rose by $12.50¢ to $635.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes reached $64.36/bbl on June 22, up $1.41/bbl since the June 20 basket price report. No price was reported June 21.
