Sam Fletcher
Senior Writer
HOUSTON, Nov. 12 -- Crude prices rebounded Nov. 9, making up most of the losses of the previous two sessions on the New York futures market amid fears that increased tension in Pakistan may threaten already tightening oil supplies.
Opposition leader Benazir Bhutto was put under house arrest Nov. 9 in Pakistan, and police took into custody thousands of her supporters, apparently to block a mass protest against the government.
The heads of the member nations of the Organization of Petroleum Exporting Countries are scheduled to meet Nov. 17-18 in Riyadh to discuss a possible increase in crude production to push down prices. However, insiders say no action is likely to be taken until the next scheduled meeting Dec. 5 in Abu Dhabi.
Still, the prospect of OPEC's upcoming meeting caused crude prices to dip back below $96/bbl in premarket trading Nov. 12 in New York. "OPEC continues to reiterate its belief that the fundamentals are not supporting high prices, pointing to geopolitical tensions, a weaker dollar, and speculation as reasons for current prices," said analysts in the Houston office of Raymond James & Associates Inc. They cautioned, "Expect crude prices to be highly volatile this week, as investors may try to push oil to $100/bbl" ahead of the Nov. 20 expiration of the December options contracts on the New York market.
Valero Energy Corp.'s 325,000 b/d Port Arthur, Tex., refinery was operating at 185,000 b/d barrels after a power failure shut down units, resulting in a Nov. 8 fire that damaged a diesel hydrotreater. The cause of the accident is under investigation, and company officials would not speculate on how long the unit might be down. But the refinery's second diesel hydrotreater was reported operating at increased rates so that production is expected to increase over the next few days.
In other news, ConocoPhillips, BP PLC, and StatoilHydro ASA began bringing back on stream Nov. 9 the combined 540,000 b/d production shut in last week because of storms in the North Sea.
Oil and gas commodity prices were "fairly steady last week," with West Texas Intermediate spot prices ending the week with a slight gain, said Robert S. Morris, Banc of America Securities LLC, New York. "Concerns about the overall US economy and a somewhat bearish crude plus product inventory report seemed to overshadow a continued drop in the US dollar while production shut-in in the North Sea, which provided a boost to crude oil prices in the middle of the week, was back on line heading into the weekend," he said.
Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, was more skeptical, however. "While it still managed to make a new weekly record, WTI showed some signs of stalling for the first time in 5 weeks," he reported.
The Societe Generale Group in Paris said, "US supply tightness will continue with high prices." They said, "Runs should continue to increase gradually in the US, Europe, and Asia as refineries come back on stream following maintenance."
Energy prices
The December contract for benchmark US light, sweet crudes regained 86¢ to $96.32/bbl Nov. 9 on the New York Mercantile Exchange. The January contract increased 64¢ to $95.30/bbl. On the US spot market, WTI at Cushing, Okla., was up 86¢ to $96.33/bbl. The December contract for reformulated blend stock for oxygenate blending (RBOB) advanced 1.84¢ to $2.46/gal on NYMEX. Heating oil for the same month, increased 1.3¢ to $2.62/gal.
The December natural gas contract escalated 18.4¢ to $7.90/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., lost 26¢ to $6.66/MMbtu. "With regard to natural gas prices, Mother Nature is now likely to be the biggest influence as winter kicks off, although we continue to believe that a normal, or warmer-than-normal, winter will lead to a sharp reduction in the 2008 consensus," Morris said.
Raymond James analysts observed: "During the recent past, rising crude prices have lent support to natural gas, in spite of very challenging natural gas fundamentals (i.e. lack of weather and burgeoning storage surplus)…. With [US] natural gas inventories standing at a record 3.545 tcf (some 99 bcf more vs. last year) and the National Oceanic & Atmospheric Administration's 8-14 day weather forecast indicating more normal weather into the latter portion of November, gas may continue to be pressured until more favorable fundamentals materialize."
Meanwhile, SGG analysts questioned how long international prices for LNG are likely to exceed prices in the US market, restricting US competition for those supplies. Price data indicate the spread between the UK and US markets will "remain positive for at least 3 years," they said. They cited reports that China's LNG imports have increased 12-fold from September 2006, with prices for those cargoes approaching $9/MMbtu.
In London, the December IPE contract for North Sea Brent crude gained 39¢ to $93.18/bbl. However, the November gas oil contract lost $4.25 to $831.50/tonne.
The average price for OPEC's basket of 12 reference crudes dropped $1 to $89.71/bbl on Nov. 9. So far this year, OPEC's basket price has averaged $66.15/bbl, up from $61.08/bbl for all of 2006.
Contact Sam Fletcher at [email protected].
