Sam Fletcher
Senior Writer
HOUSTON, Aug. 8 -- Crude prices escalated Aug. 7, approaching record-high levels in the New York market, as BP PLC began shutting in 400,000 b/d of crude production from Prudhoe Bay pending repair of a leak in a corroded transit pipeline connecting that field to the Trans-Alaska Pipeline System.
BP officials said it would take an unspecified number of days to make the repairs. However, other observers said it could take weeks, if not months, to bring the largest US oil field back on stream.
Meanwhile, energy prices pulled back some in early trading Aug. 8 in both Far East and European markets after the US Department of Energy said it would consider loaning Strategic Petroleum Reserve oil to West Coast refiners if they ask (OGJ Online, Aug. 7, 2006). An official of the Organization of Petroleum Exporting Countries said that group also is able and willing to meet any supply shortfall resulting from the shutdown of Prudhoe Bay.
Even before that incident, however, OPEC Pres. Edmund Daukoru, who also is Nigeria's oil minister, said crude prices were unlikely to fall much below $70/bbl during the rest of this year, despite adequate supplies.
In other news, the conflict in the Middle East shows no indication of winding down, despite political wrangling over a ceasefire and peacekeeping force. Traders also are watching the Aug. 8 meeting of the Federal Open Market Committee to consider another interest rate hike. "The Fed is faced with conflicting economic signals, as inflation is currently beyond comfort levels, even as there are signs of a slowing economy. The market's expectation is that this meeting may mark a pause in the series of 17 consecutive quarter point rate increases," said analysts in the Houston office of Raymond James & Associates Inc.
Energy prices
On Aug. 7, the September contract for benchmark sweet, light US crudes traded at $74.55-77.30/bbl before closing at $76.98/bbl, up by $2.22, or 3%, in the biggest 1-day percentage gain for a lead contract in 4 months on the New York Mercantile Exchange. The record-high closing price for crude on NYMEX is $78.40/bbl on July 14. The October contract escalated by $2.26 to $78.42/bbl.
On the US spot market, West Texas Intermediate crude was up by $2.22 to $76.99/bbl. Heating oil for September delivery gained 5.39¢ to $2.14/gal on NYMEX. Unleaded gasoline for the same month increased by 2.01¢ to $2.25/gal.
The September natural gas contract fell by 33.9¢ to $6.91/MMbtu, however. "Natural gas prices also ruled lower as the extreme weather condition was expected to moderate in the coming week," Raymond James analysts explained.
In London, the September IPE contract for North Sea Brent crude increased by $2.13 to $78.30/bbl. The August contract for gas oil jumped by $14.50 to $667/tonne.
The average price for OPEC's basket of 11 benchmark crudes rose Aug. 7 by $1.04 to $72.12/bbl. OPEC also reported that its Aug. 4 closing price was revised downward to $71.08/bbl.
Contact Sam Fletcher at [email protected].