MARKET WATCHThreats to oil facilities push up energy prices

Nov. 6, 2006
Energy prices rose Nov. 3 with threats against oil facilities in Indiana and Nigeria.

Sam Fletcher
Senior Writer

HOUSTON, Nov. 6 -- Energy prices rose Nov. 3 with threats against oil facilities in Indiana and Nigeria.

Someone made an apparently false telephone bomb threat against BP PLC's 400,000 b/d refinery Nov. 3 in Whiting, Ind.

Meanwhile, a militant group in Nigeria gave international oil companies 72 hr to evacuate facilities in the prolific Niger Delta prior to threatened attacks on as many as 20 facilities during "Operation Black November."

Such threats reminded traders of the vulnerability of oil and gas facilities to terrorist attacks. A similar threat to the Ras Tanura oil terminal off Saudi Arabia earlier prompted a sharp rise in oil prices, followed by a sharp retreat early last week when no attack transpired (OGJ Online, Oct. 30, 2006).

"However, oil prices rebounded sharply at the end of last week on news that militants in Nigeria might attack oil infrastructure in the Niger Delta, a bomb threat at a BP refinery in Indiana, missile tests conducted by Iran, and strong employment numbers which quelled fears of a sharp slowdown in the US economy," said Robert S. Morris, Banc of America Securities LLC, New York. "Interestingly though, oil prices really didn't react to last week's US inventory data, which revealed a slightly less-than-expected draw in crude stocks along with much larger-than-projected draws in gasoline and distillate inventories."

Even in an environment of high stocks, low crude demand because of refinery maintenance, and an unconvincing agreement among members of the Organization of Petroleum Exporting Countries to cut production, market bears were not able to break though an apparent $57/bbl price floor last week. "[B]ottoming action looks now even stronger," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

Energy prices
Both the December and January contracts gained $1.26 Nov. 3, to $59.14 and $60.88/bbl respectively on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate also was up by $1.26, to $59.15/bbl. Unleaded gasoline for December delivery gained 5.38¢ to $1.51/gal on NYMEX. Heating oil for the same month increased 3.78¢ to $1.68/gal.

The December natural gas contract escalated by 7¢ to $7.88/MMbtu on NYMEX. However, no price was available on the US spot market for gas at Henry Hub, La. After previously increasing from a 4-year low, composite spot gas prices retreated last week due largely to forecasts of warm weather and the drop in oil prices. Although residual fuel oil prices recently dropped below gas prices in some key regions, Morris said, "We do not believe any fuel switching away from natural gas and back to residual fuel oil occurred."

In London, the December IPE contract for North Sea Brent gained $1.28 to $59.15/bbl. The November gas oil contract increased by $7.50 to $523.25/tonne.

The average price for OPEC's basket of 11 benchmark crudes slipped by 18¢ to $54.25/bbl Nov. 3. So far this year, OPEC's basket price has averaged $61.84/bbl.

Contact Sam Fletcher at [email protected].