Sam Fletcher
Senior Writer
HOUSTON, Oct. 31 -- Energy prices fell Oct. 30, with crude registering the biggest 1-day drop for a front-month contract since July 2005 on the New York market, as traders anticipated a build in US fuel inventories.
Traders now fear forecasts of warming weather during a period of increased supply. But only a week ago, reports of a larger-than-expected plunge in US crude stocks triggered a spike in energy prices for what traders then interpreted as increased demand. They later determined that drop was the result of greatly reduced oil imports into the US because the Louisiana Offshore Oil Port—the largest crude import facility in US waters—was closed for 3 of the 7 days surveyed (OGJ Online, Oct. 26, 2006). The next government report on US inventories is scheduled Nov. 1.
The crude market also was impacted by what officials now say was an exaggerated threat of a possible terrorist attack on Saudi Arabian oil facilities. Late last week, Britain deployed forces from its Royal Navy to guard the Ras Tanura oil terminal off Saudi Arabia on reports of a possible insurgent attack (OGJ Online, Oct. 30, 2006). However officials said it proved to be a "nonevent."
Meanwhile, Algeria joined Saudi Arabia, Iran, and the UAE in announcing plans to participate in the Organization of Petroleum Exporting Countries' plan to cut crude production by 1.2 million b/d to 26.3 million b/d, effective Nov. 1. Indonesia, however, said it would not cut production. Under OPEC's apparently defunct quota system, Indonesia was assigned a production level of 1.45 million b/d; but its September production topped out at 862,900 b/d. Moreover, the country was a net importer or crude in May-July, sources said.
Venezuela and Nigeria also have production problems of their own and are not expected to reduce current output.
Energy prices
The December contract for benchmark US sweet, light crudes fell by $2.39 to $58.36/bbl Oct. 30 on the New York Mercantile Exchange. The January contract lost $2.29/bbl. A smaller decline was registered on the US spot market, however, with West Texas Intermediate at Cushing, Okla., reported down by $1.39/bbl to $60.76/bbl. Unleaded gasoline for November delivery fell 10.44¢ to $1.46/gal on NYMEX. Heating oil for the same month retreated 9.29¢ to $1.60/gal.
The December natural gas contract dropped 41.1¢ to $7/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., lost 45.5¢ to $7/MMbtu. "Traders remain wary as to the sustainability of gas prices as [the US] nears full storage capacity," said analysts in the Houston office of Raymond James & Associates Inc. However, they warned investors, "Don't get spooked; the current upcycle is very much intact."
In London, the December IPE contract for North Sea Brent crude fell by $2.40 to $58.68/bbl. Gas oil for November lost $14 to $523.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes continued to fall, down by 66¢ to $54.87/bbl on Oct. 30.
Contact Sam Fletcher at [email protected].
