Sam Fletcher
Senior Writer
HOUSTON, May 14 -- Energy prices continued climbing May 11 as the International Energy Agency in Paris called for the Organization of Petroleum Exporting Countries to increase crude production to prevent possible fuel shortages this summer.
IEA officials now are looking to OPEC to meet a 1.6 million b/d jump in world demand for petroleum products this June, especially since crude production from non-OPEC producers has proven much lower than IEA's earlier overly optimistic forecasts. Fears of supply shortages are fanned by thinning gasoline inventories in the face of growing demand in the US and other major consumer countries.
IEA officials recently reported the sharpest first-quarter draw of petroleum products in 11 years, down to 2.6 billion bbl at the end of March among member states of the Organization for Economic Cooperation and Development.
However, many OPEC officials have said they see no need to boost their oil production when the real problem is the lack of capacity to refine the current supply of crude. Imports of crude into the US increased by 727,000 b/d to 11 million bbl during the week ended May 4, but the input of crude into US refineries increased only 74,000 b/d to 15.3 million b/d, with units operating at 89% of capacity as a result of recent accidents and the seasonal turnaround (OGJ Online, May 9, 2007).
OECD data for February started to show the effects of OPEC's production cuts, with imports of crude from the 12 affected producer countries down by 1.3 million b/d from a year ago.
"OPEC's compliance to its production cuts has been better than expected, but its impact has been somehow softened by a warm winter making for a lesser Asian pull," said analysts at Petromatrix GMBH, Zug, Switzerland. "The real test on the visibility of the OPEC crude cuts will start in coming weeks as Asia moves out of its refinery maintenance period while the Atlantic Basin refinery runs should continue to increase. While Saudi Arabia is almost exactly at its cut mark, Iran, Venezuela, and Libya are still trailing."
OECD Europe did not suffer as much, since it received higher volumes of Iran and Iraq crude, offsetting the reduced Saudi Arabian, Nigerian, and Algeria imports, the analysts said. "For a globally unchanged level, Algeria continues the trend seen in 2006 of diverting its export away from Europe and into the US," analysts said.
Petromatrix analysts said, "Compared to a year ago, European exports of gasoline have increased in January-February, mainly to Mexico as higher demand in Latin America has reduced regional exports to Central America. European gasoline exports have also increased to Africa (South Africa, Nigeria) and the Mediterranean (Tunisia, Lebanon, the former Yugoslavia) making for less barrels available to the US and Canada."
With European transportation fuel demand continuing to move away from gasoline to diesel, combined with a rebound in naphtha demand, analysts said, "The European refinery yield on gasoline also is lower vs. previous years. The US relies on Europe for the marginal supply of gasoline, but Europe is producing relatively less and shipping more of it to other destinations."
Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported, "As the militant attacks continue in Nigeria, Chevron Corp. has decided to halt some offshore drilling projects and evacuate hundreds of contractors until the working environment becomes safer. In Sweden, a fire broke out at the 100,000 b/d refinery in Gothenburg, which was being brought back online after 5 weeks of maintenance. In the US over the weekend, Valero's refinery in Texas City had emergency flaring for the third time this month. Even though last week's [report of] US gasoline inventories rose for the first time in 13 weeks, gasoline inventory supplies are at the lowest levels for this time of year in 16 years."
Energy prices
The June contract for benchmark US light, sweet crudes gained 56¢ to $62.37/bbl May 11 on the New York Mercantile Exchange. The July contract advanced 69¢ to $64.12/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 56¢ to $62.38/bbl. The June contract for reformulated blend stock for oxygenate blending (RBOB) climbed 2.6¢ to $2.35/gal on NYMEX. Heating oil for the same month increased 1.98¢ to $1.88/gal.
The June natural gas contract escalated by 17.3¢ to $7.90/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 7¢ to $7.56/MMbtu.
In London, the June IPE contract for North Sea Brent crude gained $1.04 to $66.83/bbl. Gas oil for May was up $11.50 to $592/tonne.
The average price for OPEC's basket of 11 benchmark crudes gained 80¢ to $63.03/bbl on May 11. So far this year, OPEC's basket price has averaged $57.26/bbl, compared to an average price of $61.08/bbl for all of 2006.
Contact Sam Fletcher at [email protected].
