Sam Fletcher
Senior Writer
HOUSTON, Sept. 13 -- Crude futures prices fell for the seventh consecutive session, dropping below $64/bbl to a near 6-month low Sept. 12 on the New York market.
Analysts blamed the price decline on large US oil inventories, fears of an economic slowdown, and a milder-than-normal hurricane season so far in the Gulf of Mexico. Both the International Energy Agency in Paris and the US Department of Energy reduced their forecasts of world demand for crude this year in separate reports Sept. 12.
IEA cut its previous predictions of global demand by 100,000 b/d to 84.7 million b/d in 2006 and by 160,000 b/d to 86.2 million b/d in 2007 (OGJ Online, Sept. 12, 2006).
In a Sept. 13 report, J. Marshall Adkins in the Houston office of Raymond James & Associates Inc., said, "Recent IEA reports seem fishy." The "real story," he said, is that IEA has consistently overestimated crude production from countries outside of the Organization of Petroleum Exporting Countries and underestimated world demand because of "data discrepancy." Analysts with other firms have made similar complaints in the past about IEA numbers.
Crude markets also were undercut after OPEC ministers voted Sept. 11 to rollover their official production target of 28 million b/d in the face of falling prices. However, the "real takeaway" from OPEC's meeting "is its new lenience on maintaining quotas," Adkins said. "Essentially, OPEC's new policy is to allow each participating country to determine its own crude marketing strategies."
US inventories
The Energy Information Administration said Sept. 13 commercial US inventories of crude fell 2.9 million bbl to 327.7 million bbl during the week ended Sept. 8. Gasoline stocks inched up by 100,000 bbl to 207 million bbl during the same period. Distillate fuel inventories jumped by 4.7 million bbl to 144.6 million bbl, with ultralow-sulfur crude accounting for most of the increase, while heating oil rose by 1.4 million bbl.
Imports of crude into the US increased by 232,000 b/d to 10.6 million b/d during the same week. The input of crude into US refineries rose by 25,000 b/d to 16 million b/d, with refineries operating at 93% of capacity. Gasoline production dropped to 9.1 million b/d, while distillate fuel production increased to 4.5 million b/d—the second highest weekly average ever, said EIA.
In other news, 20,000 oil workers from two unions were expected to participate in a 3-day "warning" strike scheduled Sept. 13 in Nigeria to force the government to increase security in the Niger Delta. One Nigerian worker was reported killed Sept. 12 in the delta as gunmen attacked a boat carrying employees of a Chevron Corp. affiliate, sources said.
"It has become increasingly dangerous for oil workers in this region, as 50 workers have been kidnapped in Nigeria this year alone. Unionists said they might limit the impact of the strike on crude output," said Raymond James analysts. Nigeria's production loss in recent months has been estimated at 593,000 b/d.
Energy prices
The October contract for benchmark US light, sweet crudes fell by $1.85 to $63.76/bbl Sept. 12 on the New York Mercantile Exchange. The November contract dropped $1.69 to $64.90/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.85 to $63.77/bbl. Heating oil for October delivery lost 4.57¢ to $1.76/gal on NYMEX. Unleaded gasoline for the same month declined by 4.25¢ to $1.55/gal. The October natural gas contract dropped 9.6¢ to $5.57/MMbtu.
In London, the October IPE contract for North Sea Brent crude fell $1.56 to $62.99/bbl. However, the September gas oil contract was unchanged at $576.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes slipped by 28¢ to $60.42/bbl on Sept. 12.
Contact Sam Fletcher at [email protected].