Sam Fletcher
Senior Writer
HOUSTON, Sept. 28 -- The expiring October natural gas contract approached a 4-year low Sept. 27, but crude prices rebounded to almost $63/bbl as traders shrugged off a bearish report of US oil inventories in expectation that the Organization of Petroleum Exporting Countries may soon cut production.
However, Raymond James & Associates Inc. analysts in Houston reported, "The Algerian oil minister clearly stated that OPEC is not worried about recent weakness in prices and cites that this is normal this time of year with the end of the US summer driving season." The rebound of crude futures prices was "based on the market's perception of crude being oversold," they said. "Keeping a lid on crude prices were the latest developments on the Iranian front, where talks between Iran and European Union officials resumed."
The gas price fell in anticipation of a continued build in winter storage. On Sept. 28, the US Energy Information Administration reported the injection of 77 bcf of gas into US underground storage during the week ended Sept. 22. That was below the consensus of Wall Street analysts and down from 93 bcf injected the previous week. However, it surpassed the 62 bcf injection in the same period last year. US gas storage is now at nearly 3.3 tcf, up by 377 bcf from year-ago levels and 354 bcf above the 5-year average.
EIA said commercial US inventories of crude dipped by 100,000 bbl to 324.8 million bbl during the week ended Sept. 22 (OGJ Online, Sept. 27, 2006). Gasoline stocks jumped by 6.3 million bbl to 213.9 million bbl, and distillate fuel inventories rose by 2.6 million bbl.
In an annual report earlier this week, EIA said US gas reserves grew 6% in 2005, the largest annual increase in 35 years. Onshore gas reserves rose for the seventh consecutive year, offsetting a 10% decrease in gas reserves in US waters of the Gulf of Mexico. The largest gas reserves increases were in Texas and Colorado, particularly in the Barnett Shale play in Texas, with reserves of 2.1 tcf.
Total US gas production declined 4% in 2005, however, because Hurricanes Katrina and Rita shut in 80% of gulf production. Gulf gas production was in a 10%/year decline prior to those hurricanes, EIA said. It reported US crude reserves also increased in 2005 for the first time in 3 years.
Energy prices
The November contract for benchmark US sweet, light crudes escalated by $1.95 to $62.96/bbl Sept. 27 on the New York Mercantile Exchange, the highest closing in a week after an 18% drop over the past 2 months. The December contract gained $1.94 to $63.86/bbl.
On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.95 to $62.97/bbl. Heating oil for October jumped by 5.63¢ to $1.71/gal on NYMEX. Unleaded gasoline for the same month gained 4.81¢ to $1.54/gal. The October gas contract expired at $4.20/MMbtu, down 32.5¢ for the day, after trading as low as $4.07/MMbtu during that NYMEX session.
In London, the November IPE contract for North Sea Brent crude increased by $2.09 to $62.21/bbl. The October contract for gas oil lost $5.25 to $534/tonne, however.
The average price for OPEC's basket of 11 benchmark crudes inched up 4¢ to $55.90/bbl on Sept. 27.
Contact Sam Fletcher at [email protected].
