Sam Fletcher
OGJ Senior Writer
HOUSTON, July 26 -- Energy prices declined in the New York market as Tropical Storm Bonnie fizzled into a tropical depression over south Florida July 23 and dissipated over the weekend.
Workers were returning to offshore rigs and platforms July 23, and some of the production shut in as a precaution ahead of the storm was brought back on stream. The Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE) said that same day workers were evacuated from 84 of the 634 manned production platforms and from 10 of 39 rigs still in the Gulf of Mexico. Vessels and rigs responding to the BP oil spill had to curtail or halt operations ahead of the storm.
BOE officials reported 46.7% of the oil and 22% of the natural gas normally produced from the gulf were shut in ahead of the storm.
The front-month crude contract in New York declined below $79/bbl July 23 “on profit taking despite support from the stronger euro, temporary shut-ins in the Gulf of Mexico due to tropical depression Bonnie, and strength in the equities market,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. Restored production over the next few days and an expected report of a build in US crude stockpiles likely will undercut prices, he said.
Analysts at Raymond James & Associates Inc. said the broader market closed up roughly 1% while energy stocks underperformed and remained roughly flat on July 23.
Natural gas futures prices also dipped as Bonnie lost power and rains from the storm cooled much of the southern US, weakening demand for air conditioning, Sharma said.
Meanwhile, federal permits issued for drilling projects in shallow gulf waters jumped to 15 issued during last week—“a sharp uptick from the previous week's 1 [issued permit] and the 14 issued the 5 weeks prior,” said Pritchard Capital Partners. “Could this mean that the BOE has figured out the new bureaucracy and processes such that permitting will occur at a more regular timeline? At this point it is too soon to tell, but this is a good start to getting back to work in the shallow water. [It] should help the usual cast of characters that make a living in that space,” said Pritchard Capital analysts.
They noted weekly US land permits rebounded to 1,355 following 2 weeks of notably weaker activity, although the 4-week average declined to 1,242. “This level of permitting still suggests the rig count should be no higher than 1,500 rigs (1,488 to be precise), so we are holding firm in our belief we will see declines in August,” they said.
Energy prices
The September contract for benchmark US light, sweet crudes declined 32¢ to $78.98/bbl July 23 on the New York Mercantile Exchange. The October contract lost 30¢ to $79.34/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 32¢ to $78.98/bbl. Heating oil for August delivery dipped 1.19¢ to $2.05/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased 2.44¢ to $2.12/gal.
The August natural gas contract fell 6.3¢ to $4.58/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.5¢ to $4.70 MMbtu.
In London, the September IPE contract for North Sea Brent crude was down 37¢ to $77.45/bbl. Gas oil for August lost $1.75 to $651.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained 97¢ to $74.44/bbl. So far this year, OPEC’s basket price has averaged $75.55/bbl up from $61.06/bbl for all of 2009.
Contact Sam Fletcher at [email protected].
Rystad Energy.
