Sam Fletcher
Senior Writer
HOUSTON, Aug. 28 -- The near-month natural gas futures price dropped to an 11-month low Aug. 27 in the face of record high US storage while gasoline prices climbed on speculation that US supplies declined for a fourth consecutive week due to refinery outages.
Chevron Corp. said its 330,000 b/d Pascagoula, Miss., refinery—1 of the 10 largest in the US—is still running at half capacity following an Aug. 16 fire. Citgo Petroleum Corp. reduced rates at its 156,000 b/d refinery in Corpus Christi, Tex., due to a problem with the alkylation unit.
With declining equities and a stronger dollar index providing no price support for energy futures, the front-month contract for reformulated blend stock for oxygenate blending (RBOB) was the main leading sponsor of the energy complex on Aug. 27. "RBOB is making strong gains with short covering in front of [its Aug. 31] expiry, and its widening backwardation is pulling the West Texas Intermediate backwardation higher with it," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.
In addition, analysts in the Houston office of Raymond James & Associates Inc. said, "The Organization of Petroleum Exporting Countries, producer of about 40% of the world's oil, stated [Aug. 27] that the oil market is well supplied, prompting speculation that the group will not raise its limits on output when it meets Sept. 11 in Vienna to discuss production plans for the fourth quarter."
Meanwhile, Pride International Inc., Houston, and Noble Corp. in nearby Sugar Land, Tex., were the first drilling contractors to report virtually no damage from Hurricane Dean to rigs working off Mexico. "Pride, which operates a 12-rig Mexican jack up fleet and 3 platform rigs, reported that its fleet escaped the hurricane unscathed. Workers are returning immediately, and full operations are expected to resume within the next couple of days. Noble, which has an 8-rig Mexican jack up fleet, also announced that its fleet sustained virtually no damage from the hurricane. Over the weekend, all personnel had returned to these rigs and operations are back to normal," said Raymond James analysts. "Fortunately for offshore drillers in the region, it appears safe to assume that none of their Mexican rigs sustained any damage, and all rigs should return to normal operations no later than the end of this week."
Energy prices
The October contract for benchmark US sweet, light crudes gained 88¢ to $71.97/bbl Aug. 27 on the New York Mercantile Exchange. The November contract increased by 69¢ to $71.38/bbl. On the US spot market, WTI at Cushing, Okla., was up 59¢ to $71.98/bbl. The September contract for RBOB escalated by 5.79¢ to $2.04/gal. Heating oil for the same month climbed 1.25¢ to $2.01/gal.
The September natural gas contract traded as low as $5.19/MMbtu Aug. 27 on NYMEX before closing at $5.38/MMbtu, down 14.3¢ for the day. On the US spot market, gas at Henry Hub, La., fell 36¢ to $5.35/MMbtu.
In London, the October IPE contract for North Sea Brent crude increased 33¢ to $70.95/bbl. The September gas oil contract lost $3 to $617/tonne.
The average price for OPEC's basket of 11 reference crudes gained 21¢ to $67.73/bbl on Aug. 27.
Contact Sam Fletcher at [email protected].
