Sam Fletcher
Senior Writer
HOUSTON, Oct. 11 -- Energy prices continued to rise Oct. 10 amid reports of a fire at BP PLC's Prudhoe Bay oil field and surprise labor strikes at Chevron Corp. facilities in Nigeria.
However, Chevron officials said oil production in Nigeria was not affected despite strikes by the National Union of Petroleum and Natural Gas Workers at six of the company's facilities. BP, meanwhile, said 30,000 b/d of production was curtailed pending repairs following a small fire Oct. 6 in the Prudhoe Bay field that was quickly extinguished.
Crude prices also rose on fears Turkey may attack members of the Kurdistan Workers' Party in northern Iraq. "The Turkish military is getting more and more impatient with the Kurdish militants based in Iraq and the likelihood of Turkish cross-border action into Iraq is increasing," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. "Such actions are likely to be limited in scope but will still add some geopolitical premium when and if such crossing occurs."
A recent resolution passed by a US House panel that described as genocide Turkey's previous handling of Armenians "will seriously deteriorate relations between Turkey and the US and will make it harder for Turkey to refrain from an Iraqi intervention," Jakob warned.
Meanwhile, he said, "We do not read the reported workers strike action on Chevron Nigeria as significant enough to impact oil production and we will currently not price-in much for this specific risk. Saudi Arabia has given full crude nominations to buyers in Japan and South Korea, the first time this year. With Iraq being rather successful in exporting Kirkuk crude oil to the Mediterranean, it seems that Saudi Arabia is sending most of its increased OPEC allocation to customers in the Far East."
US and other members of the United Nations Security Council "should meet again next week over Iranian sanctions but with [Russian] President [Vladimir] Putin traveling to Teheran next week, we would not expect anything new on Iranian sanctions," Jakob said.
US inventories
Speculation that fuel inventories fell last week also helped push up energy prices. The Energy Information Administration reported Oct. 11 that commercial US inventories of crude dropped 1.7 million bbl to 320.1 million bbl during the week ended Oct. 5. Gasoline inventories stocks increased by 1.7 million bbl to 193 million bbl during the same period but are still below average. Distillate fuel inventories lost 600,000 bbl to 135.3 million bbl. Propane and propylene inventories gained 1.4 million bbl to 60.5 million bbl.
Imports of crude into the US fell by 384,000 b/d to 9.9 million b/d during that period. Input of crude into US refineries also reduced, down 43,000 b/d to 15.1 million b/d with refineries operating at 87.8% of capacity. Nevertheless, gasoline production rose to 8.9 million b/d, while distillate fuel production increased to 4.2 million b/d.
Energy prices
The November contract for benchmark US sweet, light crudes bump up by $1.04 to $81.30/bbl Oct. 10 on the New York Mercantile Exchange. The December contract gained $1.07 to $80.61/bbl. On the US spot market, West Texas Intermediate was up $1.04 to $81.31/bbl. Heating oil for November delivery escalated by 3.19¢ to $2.22/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) increased 1.34¢ to $2.03/gal.
"We still do not see a strong fundamental justification for the current price rebound," Jakob said. "Technically, RBOB gasoline remains well supported…while a strong floor has been defined on crude oil. We are however not breaking out of a range yet on WTI and lacking a trending momentum. We are still in the shoulder period for oil demand and we had a similar range trading action in October last year, the difference being that last year this was occurring after a downward trend while this year it is after an upward trend."
The November natural gas contract gained 14.7¢ to $7.01/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 10¢ to $6.80/MMbtu. EIA reported the injection of 73 bcf of gas into US underground storage in the week ended Oct. 5. That was above the Wall Street consensus and compared with injections of 57 bcf the previous week and 62 bcf in the same period last year. US gas storage is now above 3.3 tcf, which is 44 bcf less than a year ago but up by 237 bcf from the 5-year average.
In London, the November IPE contract for North Sea Brent crude increased by $1.11 to $78.60/bbl. Gas oil for October inched up 25¢ to $682/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 benchmark crudes jumped up $1.29 to $75.36/bbl on Oct. 10. The OPEC Secretariat in Vienna will be closed Oct. 12 for Eid al-Fitr, an Islamic holiday that marks the end of Ramadan, the month of fasting.
Contact Sam Fletcher at [email protected].
