Sam Fletcher
Senior Writer
HOUSTON, Sept. 24 -- The new front-month November contract for crude closed below $82/bbl Sept. 21, ending a nearly 2-week string of price increases to new record highs in the New York Mercantile Exchange.
The October contract for benchmark US light, sweet crudes earlier climbed from $77.49/bbl at the close of the Sept. 10 session on NYMEX to an intraday peak of $84.10/bbl and a closing price of $83.32/bbl on its expiration Sept. 20. On Sept. 21, the November contract dropped 16¢ to $81.62/bbl as a storm system went ashore in the Florida panhandle and offshore workers began returning to undamaged rigs and platforms in the US sector of the Gulf of Mexico.
On Sept. 20, the US Minerals Management Service reported 5 of the 834 production platforms and 3 of 89 mobile rigs on federal leases in the Gulf of Mexico were evacuated. MMS officials reported offshore operators had shut in as much as 1.3 million b/d of crude and 1.9 bcfd of natural gas production in preparation for the storm.
"The tropical depression in the region turned out to be a nonevent, as the oil and gas infrastructure in the gulf was not harmed. Natural gas is down over 2% this morning [in early trading]," said analysts Sept. 24 in the Houston office of Raymond James & Associates Inc.
Moreover, they said, "It is important to note that the October gas contract, which rolls over this week, is trading almost $1[/MMbtu] lower than the November natural gas contract. This is in line with our gas call, which estimates that natural gas prices will rebound toward the end of 2007 before trending lower throughout 2008."
Last week Raymond James cut its US natural gas price forecast for 2008 to an average $7/Mcf from $10/Mcf previously. "Unlike the past 2 years, we think the average 2008 US natural gas 12-month futures strip will also fall well below $8/Mcf. Since most companies base their drilling plans on futures pricing rather than spot prices, we are now expecting 2008 US drilling activity to decline 4% year-over-year (or 10% from peak to trough). Of course, lower drilling activity combined with recent equipment additions should exert even greater downward pressure on US drilling and service pricing," the analysts said.
Meanwhile, meteorologists still are watching three potential storm areas in the Atlantic, the Caribbean, and the Gulf of Mexico. The primary area for possible development is a tropical wave over the Atlantic southwest of the Cape Verde Islands in an environment of low shear and high ocean water temperatures. Meteorologists expect it to develop soon into a tropical depression that could threaten the gulf.
In other news, Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, said the US and some European countries—"mainly France" —will press for tougher sanctions against Iran for its defiance of the United Nations in its attempts to enrich uranium for possible nuclear weapons. Resistance against such sanctions is still expected from China and Russia. "The Russian president will be visiting Teheran on Oct. 16, and Russia should not change course on Iran before that visit," said Jakob.
However, he said, "With France joining more aggressively the US side on the Iranian conflict, the risk is for a push of tougher sanctions on a unilateral basis (rather than through the UN). Given that Iran makes a relatively high share of the French crude oil import slate, the French taking leadership for a call of tougher sanctions outside of a UN mandate can be seen as a bold move."
Energy prices
The December crude contract was unchanged at $80.64/bbl Sept. 21 on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 3¢ to $83.33/bbl. Heating oil for October delivery dipped 0.47¢ to $2.26/gal on NYMEX. The October contract for reformulated blendstock for oxygenate blending (RBOB) dropped 2.06¢ to $2.11/gal.
The October natural gas contract gained 7.2¢ to $6.08/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 5¢ to $6.07/MMbtu.
In London, the November IPE contract for North Sea Brent crude rose 21¢ to $79.30/bbl. Gas oil for October advanced by $5.75 to $710.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 benchmark crudes escalated by 94¢ to $76.72/bbl on Sept. 21. So far this year, the OPEC basket has averaged $63.41/bbl vs. $61.08 for all of 2006.
Contact Sam Fletcher at [email protected].
