HOUSTON, Jan. 5 -- Energy prices increased Jan. 4 with the assassination of the governor of Baghdad, the most senior Iraqi official killed since the June handover of power to local authorities by the US-led coalition.
That was followed Jan. 5 with another deadly bombing at a police academy in Baghdad, marking the second consecutive day that a police facility was targeted by insurgents. "The substantial escalation of violence over the past 3 weeks marks the most serious deterioration in Iraq's security climate since the handover. While some level of escalation during the run up to the upcoming Jan. 30 elections had been expected, it now appears that there is a deliberate effort among the insurgent groups to force a delay to the elections," said analysts at the Houston office of Raymond James & Associates Inc.
"For the third week in a row, oil exports from northern Iraq are at a standstill," they said. "Repairs following the most recent major acts of sabotage on Dec. 18-19 are still not completed. In fact, the repairs are being hindered by ongoing small attacks against the same pipeline."
Energy prices also were bid up in expectation of a draw down of commercial US crude stocks in a "typical" move to reduce year-end tax bills.
"In looking at storage changes for the last reporting week of each year back to 1994, there have been crude oil stock draws 8 out of 10 times. For the past 5 years, the average decline has been a wee more than 4 million bbl. While we've seen crude imports trend higher owing to wide price spreads between the US and foreign markets, the pattern of storage builds is expected by us to see a hiccup for the reporting week on prospects for a typical end-of-year play to boost crude 'use' by refiners," said analysts at Merrill Lynch Global Securities Research & Economics Group, New York, in a Jan. 5 report.
The Energy Information Administration subsequently reported a drop of 3.3 million bbl in crude inventories to 291.8 million bbl during the week ended Dec. 31, exceeding market expectations of a "small" draw of 500,000 bbl. However, gasoline and distillate fuel stocks each increased by 2 million bbl in the same period, to 214.3 million bbl and 121.1 million bbl, respectively.
US imports of crude declined by 88,000 b/d to 9.8 million b/d during that period. But the input of crude into US refineries increased by 81,000 b/d to an average 15.8 million b/d during the period, while refining capacity inched up to 94.8% from 94.2%. Production of distillate fuel set a weekly record, averaging 4.3 million b/d, and gasoline production remained "relatively high," said EIA.
The February contract for benchmark US light, sweet crudest gained $1.79 to $43.91/bbl Jan. 4 on the New York Mercantile Exchange, while the March contract advanced by $1.74 to $44.08/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.79 to $43.92/bbl. Heating oil for February delivery increased by 5.44¢ to $1.25/gal on NYMEX, while gasoline for the same month was up by 4.04¢ to $1.17/gal. The February natural gas contract advanced by 11.2¢ to $4.90/MMbtu as traders covered excess natural gas sales contracts and crude prices improved.
In London, the February contract for North Sea Brent crude increased by 58¢ to $41.04/bbl on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 90¢ to $36.57/bbl Jan. 4.
Contact Sam Fletcher at [email protected]