Sam Fletcher
Senior Writer
HOUSTON, Oct. 12 -- Crude prices continued to fall Oct. 11, although at a slower rate, with traders still uncertain over a possible production cut by the Organization of Petroleum Exporting Countries.
"While some OPEC countries have announced cuts separately, an official OPEC announcement is still pending. Meanwhile, Saudi Arabia came out and said that it intends to make regular deliveries to Asian and European refiners," said analysts in the Houston office of Raymond James & Associates Inc.
Fuel inventories
Natural gas futures also fell, ending an 8-day rally in the New York market, as cooler weather apparently failed to stem the build in winter storage. The US Energy Information Administration reported Oct. 12 the injection of 62 bcf of gas into US underground storage during the week ended Oct. 6. That was below the consensus of Wall Street analysts, down from a 73 bcf injection a week ago, but up from 60 bcf during the same period last year. US gas storage now stands at nearly 3.4 tcf, up by 410 bcf from year-ago levels and 358 bcf above the 5-year average.
EIA said commercial US crude oil inventories increased by 2.4 million bbl to 330.5 million bbl during the same week. Gasoline stocks rose by 300,000 bbl to 215.4 million bbl, but distillate fuel inventories dropped 1.6 million bbl to 149.9 million bbl. Ultralow-sulfur diesel dipped by 200,000 bbl in its first decline since the week ended July 14. Heating oil fell by 1.8 million bbl, the largest decline since the week ended Mar. 24, said EIA officials.
Crude imports into the US dropped 149,000 b/d to 10.4 million b/d in the latest period. However, input of crude into US refineries increased by 23,000 b/d to 15.3 million b/d, with units operating at 89.2% of capacity. Gasoline production was down slightly to 8.9 million b/d, while distillate production declined significantly to 4 million b/d.
In a separate Oct. 12 report, the US Department of Agriculture reduced its 2006-07 corn harvest forecast by 209 million bushels and raising its 2007 corn price forecast to $2.40-2.80/bushel from $2.15-2.55/bushel previously. Since US corn is the primary source for the production of ethanol, an oxygenate additive to gasoline, the reduced crop and higher price "should be negative for ethanol stocks," said Jacques Rousseau, senior energy analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va. However, the projected 10.9 billion bushel harvest would still be the third largest ever.
"Corn futures prices have been rising during the past few months and are currently around $3/bushel for 2007; however, we believe that corn price concerns are overstated with respect to ethanol producers," Rousseau said. Total production capacity of US ethanol facilities is 5 billion gal/year.
Energy prices
The November contract for benchmark US sweet, light crudes traded at $57.50-59.10/bbl before closing at $57.59/bbl, down 93¢ for the day on the New York Mercantile Exchange. The December contract lost 81¢ to $59.45/bbl. On the US spot market, West Texas Intermediate was down 93¢ to $57.60/bbl. Heating oil for November delivery dropped 0.89¢ to $1.67/gal. Unleaded gasoline for the same month fell 1.65¢ to $1.45/gal on NYMEX. The November natural gas contract lost 31.6¢ to $6.15/MMbtu.
In London, the November IPE contract for North Sea Brent crude declined 69¢ to $58.65/bbl. The October gas oil contract continued to waffle, however, up $2.50 to $540/tonne.
The average price for OPEC's basket of 11 benchmark crudes dropped $1.06 to $54.25/bbl Oct. 11.
Contact Sam Fletcher at [email protected].
