Sam Fletcher
Senior Writer
HOUSTON, Aug. 17 -- Energy prices continued to tumble Aug. 16 with the US Commerce Department reporting housing starts at the lowest level in 2 years, an indication that the US economy is slowing.
The US Energy Information Administration also reported the largest decline in US gasoline demand in 4 months. It said US inventories of crude fell by 1.6 million bbl to 331 million bbl during the week ended Aug. 11. Gasoline stocks dropped 2.3 million bbl to 205.4 million bbl during the same period, but distillate fuel inventories increased by 800,000 bbl to 133.2 million bbl (OGJ Online, Aug. 16, 2006).
"So far high oil prices have not caused recession in the economically developed world; indeed continuing high oil prices are contributing to more efficient use of current technology, and in the long term they are energizing moves toward sustainable energy technology. However, oil is signing its own death warrant by pricing itself out of the market and making previously expensive alternatives highly attractive to energy consumers," said analysts at Chatham House, also known as the Royal Institute of International Affairs in London, a nonprofit, nongovernmental organization for the study of international issues.
"In the past week, the most significant market move has been the more than $10/bbl, or 25¢/gal, fall in gasoline prices and the accompanying fall in gasoline cracks," said Paul Horsnell, Barclays Capital Inc., London. The gasoline market "has been negatively affected by the potential return of some Bonny Light exports from Nigeria," he said.
Royal Dutch Shell PLC recently reactivated its oil pipeline in the troubled Niger Delta area of Nigeria. Shell declared force majeure on 180,000 b/d of Nigerian crude production in late July because of an unexplained leak in that pipeline.
In other news, the US Department of Transportation told BP PLC any plan to bring the eastern half of Prudhoe Bay back into production will require at least 2 weeks notice and explicit federal approval.
Energy prices
The September contract for benchmark US sweet, light crudes fell by $1.16 to $71.89/bbl Aug. 16 on the New York Mercantile Exchange, the lowest level since June for a front-month contract in that market. The October contract lost $1.14 to $73.19/bbl.
On the US spot market, West Texas Intermediate crude at Cushing, Okla., was down by $1.16 to $71.90/bbl. Gasoline for September delivery dropped 1.35¢ to $1.98/gal on NYMEX. Heating oil for the same month dipped by 0.66¢ to $2.02/gal.
The September natural gas contract lost 9.5¢ to $6.77/MMbtu as the recent heat wave dissipated. EIA reported Aug. 17 the injection of 37 bcf of natural gas into US underground storage during the week ended Aug. 11. That compared with the rare summer withdrawal of 12 bcf the previous week and injection of 52 bcf during the same period a year ago. US gas storage now stands at 2.8 tcf, up by 292 bcf from a year ago and 349 bcf above the 5-year average.
In London, the September IPE contract for North Sea Brent crude declined by 72¢ to $73.08/bbl. Gas oil for the same month lost 50¢ to $649/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes fell by 77¢ to $68.24/bbl.
Contact Sam Fletcher at [email protected].
