Sam Fletcher
OGJ Senior Writer
HOUSTON, Sept. 20 -- Crude oil prices continued to decline for the fourth consecutive day Sept. 17 with crude closing below $74/bbl in the New York market. The front-month natural gas futures contract gave back most of its gain from the previous session, but the spot gas cash market increased.
“Oil prices dropped 1.3% after Enbridge's pipeline was reopened after only a week of downtime from a minor leak and the spread between West Texas Intermediate and Brent widened,” said analysts in the Houston office of Raymond James & Associates Inc. Enbridge Energy Partners LP reactivated its 670,000 b/d 6A crude pipeline that was shut-in Sept. 9 due to a leak (OGJ Online, Sept. 17, 2010).
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The preliminary University of Michigan consumer confidence index for September [published Sept. 17] was at the lowest level since August of last year. The US Federal Reserve has failed to improve unemployment, and its artificial support of the financial market has for now been a total failure since the equity markets have seen continuous outflows since the May 6 Flash Crash [when the Dow Jones Industrial Average plunged 600 points only to recover within minutes; it was the second-largest intraday point swing and the biggest one-day point decline in DJIA history].”
The second round of “quantitative easing” [QE2], Jakob said, “might be desired by a few large financial institutions, but we do not think that it will do anything to increase consumer confidence.” QE1 was the Fed's unprecedented purchase of agency debt to prop up the housing market and credit facilities for big banks. Jakob said, “Given that the US oil fundamentals are still oversupplied in stocks, our opinion remains that this week will be predominantly driven by the exogenous financial inputs.”
In other news, Raymond James analysts cited the Energy Information Administration’s Sept. 17 announcement the US and China are close to a unique energy data-sharing agreement. “This accord would cover a spectrum of energy information and help work towards improving transparency in commodity markets in order to limit price swings,” the analysts reported. “With China being the world's fastest-growing and least transparent energy consumers (the Paris-based International Energy Agency forecasting consumption to grow 9% in 2010 and 4.3% in 2011), this sharing agreement will lead to a better understanding of global demand and prevent excessive fluctuations in oil markets in the future.”
Energy prices
The October contract for benchmark US light, sweet crudes traded at $72.75-75.25/bbl Sept. 17 on the New York Mercantile Exchange before closing at $73.66/bbl, down 91¢ for the day. The November contract dropped 82¢ to $74.92/bbl. On the US spot market, WTI at Cushing, Okla., was down 91¢ to $73.66/bbl. Heating oil for October delivery inched up a mere 0.02¢ but closed essentially unchanged on a rounded $2.10/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month dipped 0.55¢ to $1.92/gal.
The October natural gas contract lost 3.8¢ to $4.02/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., gained 2.5¢ to $4.08/MMbtu.
In London, the November IPE contract for North Sea Brent crude declined 27¢ to $78.21/bbl. Gas oil for October lost $9.25 to $663.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped 54¢ to $74.95/bbl on Sept. 17. So far this year, OPEC’s basket price has averaged $75.24/bbl.
OPEC “has enjoyed prices in a prevailing $70-80/bbl range through most of 2010, largely thanks to the decision taken at the end of 2008 to cut production by 4.2 million b/d from the levels that had been pumped in September that year,” said analysts at KBC Energy Economics, a division KBC Advanced Technologies PLC in Surrey, UK.
They noted, “OPEC Sec. Gen. Abdullah Al-Badri said this week that decision was the best OPEC had ever taken. Earlier this year, at the March meeting in Vienna, Saudi Oil Minister Ali Naimi described oil prices as ‘beautiful’ and the word ‘cheating’ was barely pronounced even though the group’s members were only around 50% compliant with their targeted production cuts at the time.”
This has been a successful year for OPEC, but “at the expense of the group’s largest member slipping into second place in the league table of oil producers.” KBC analysts said, “Russia, which was expected to support OPEC’s bid to boost prices in December 2008, did nothing of the sort, and its output has soared to above 10 million b/d, nearly 2 million b/d more than Saudi Arabia, which has invested hundreds of billions of dollars in boosting capacity to what it claims is 12.5 million b/d.”
Badri last week suggested Russia needs to slow its crude production at some point. He said next year is likely to be “more challenging,” even for OPEC unity.
Contact Sam Fletcher at [email protected].
Rystad Energy.
