Sam Fletcher
Senior Writer
HOUSTON, Oct. 25 -- The front-month crude futures contract jumped above $87/bbl again Oct. 24 after the US Department of Energy reported unexpected large drops in inventories of crude and petroleum products.
The Energy Information Administration said commercial US crude inventories fell 5.3 million bbl to 316.6 million bbl in the week ended Oct. 19, the lowest level since Jan. 5, vs. market expectations of an increase of 800,000-1 million bbl. Gasoline stocks dropped 2 million bbl to 193.8 million bbl, the lowest level since Mar. 2, while distillate fuel inventories decreased by 1.8 million bbl to 134.5 million bbl (OGJ Online, Oct. 24, 2007).
After falling for four sessions, the front-month crude contract now "is back to being within 1 day volatility of $90/bbl," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.
Meanwhile, storms shut down Mexico's three main oil-exporting ports in the Gulf of Mexico and killed 18 Mexican oil workers after the Usumacinta jack up rig struck the Kab 101 production platform 20 miles off Dos Bocas in Tabasco state on Oct. 23. One of the rig's legs hit a valve assembly on the platform, causing an oil and gas leak. Officials from state firm Petroleos Mexicanos said it's one of the worst offshore accidents in the company's history. Storm conditions are hampering Navy rescues of other offshore workers in the Mexican sector of the gulf.
In other news, Turkey's military attacked Kurdish fighters in northern Iraq Oct. 25 in the fourth day of fighting.
Jakob reported: "The continued US rhetoric against Iran is also making it harder for short sellers of crude oil. Iran is increasingly replacing Iraq as the point of focus for the next US elections and the US administration will likely announce soon a new set of unilateral sanctions against Iran that would particularly target the Iranian Quds forces [a special unit of Iran's revolutionary guards] and raise the level of tension between the two protagonists. Another layer of 'Iranian fear' has also come on the back of the supplemental war funding submitted by the administration Oct. 22. Supposedly, the supplemental funding is to support the war efforts in Iraq and Afghanistan, but it included a budgetary line for upgrading the B-2 Stealth bombers to be able to load the new massive ordnance penetrator (MOP) bomb."
The MOP is a new massive 30,000-lb bunker-busting bomb. According to Jakob, the MOP "would be of little help in Iraq."
Energy prices
The December contract for benchmark US sweet, light crudes jumped $1.83 to $87.10/bbl Oct. 24 on the New York Mercantile Exchange. The January contract climbed $1.67 to $86.13/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $2.88 to $89.36/bbl. Heating oil for November delivery climbed 4.22¢ to $2.34/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) increased 3.86¢ to $2.15/gal.
The November natural gas contract shot up 21.1¢ to $6.97/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 15¢ to $6.21/MMbtu. "Natural gas also increased on the day as news of a possible storm forming in the gulf sparked short coverings. Some weather reports show the potential for a late forming storm to develop in the Caribbean later this week," said analysts in the Houston office of Raymond James & Associates Inc.
EIA reported the injection of 68 bcf of natural gas into US underground storage in the week ended Oct. 19. That was above the Wall Street consensus and compared with injections of 39 bcf the previous week and 19 bcf in the same period last year. US storage now stands at 3.4 tcf, down 15 bcf from year-ago levels but 232 bcf above the 5-year average.
In London, the December IPE contract for North Sea Brent crude gained $1.52 to $84.37/bbl. The November gas oil contract increased $13.75 to $732.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained 44¢ to $80.55/bbl on Oct. 24.
Contact Sam Fletcher at [email protected].
