HOUSTON, Oct. 20 -- Crude prices continued to retreat Oct. 19 as US inventories increased and powerful Hurricane Wilma appeared still on track to strike western Florida this weekend.
The Energy Information Administration reported Oct. 19 that commercial US inventories of crude jumped by 5.6 million bbl to 312 million bbl in the week ended Oct. 14. Gasoline stocks gained 2.9 million bbl to 195.7 million bbl in the same period. However, distillate fuel inventories fell by 1.9 million bbl to 122.7 million bbl with losses of both diesel fuel and heating oil (OGJ Online, Oct. 19, 2005).
Wilma was downgraded to a Category 4 hurricane Oct. 19, but forecasters said it could regain strength to Category 5 status. There also was increased uncertainty among forecasters about the storm's predicted path. Although Wilma is expected to miss oil and natural gas facilities in the Gulf of Mexico, offshore producers are monitoring the storm's course.
Offshore still recovering
The US Minerals Management Service reported Oct. 19 that 211 offshore platforms and 4 rigs—2 more than the previous day—were evacuated in the Gulf of Mexico, primarily as a result of Hurricane Rita, which was the last hurricane to pass through the oil and gas producing area. Shut-in production was reduced slightly to 973,084 b/d of crude and 5.2 bcfd of natural gas. Cumulative production lost from federal leases in the Gulf of Mexico since Aug. 26 now stands at 62.6 million bbl of crude and 316 bcf of gas.
The Louisiana Office of Conservation said gas production from onshore fields and in state waters in 38 parishes increased to 805 MMcfd Oct. 19, from 765 MMcfd previously. However, 46.8% of the wells in that region remain shut in. Louisiana's Department of Natural Resources said onshore crude production in southern Louisiana had reached 55,756 b/d, or 27.5% of the region's capacity. Of the 55 intrastate pipelines operating in southern Louisiana, 2 have reopened, 40 remain shut in, 11 are partly shut in, and the status of 2 is unknown, officials reported. The amount of refining capacity still shut in along the Gulf Coast has been reduced to 1.27 million b/d, authorities said.
Meanwhile, more than half of the energy industry members who participated in a recent Ernst & Young LLP conference said they expect crude prices to stay at $50-60/bbl over the next 12 months. Moreover, 89% of those surveyed said crude prices will remain well above $50/bbl for the next 10 years. Half said the most important factor in resolving current supply constraints is better access to reserves.
"Tightness of supply, growing demand, and access to new areas of exploration were themes heard throughout the conference," said Charles Swanson, director of Ernst & Young's Energy Center in Houston. "The [abilities] to access additional drilling prospects, increase drilling activity, and hire enough talent are the primary challenges the industry faces in meeting the country's growing energy needs."
On Oct. 20, EIA reported the injection of 75 bcf of natural gas into US underground storage in the week ended Oct. 14. That surpassed Wall Street's earlier projections and was up from 58 bcf the previous week and from 64 bcf in the same period last year. US gas storage now exceeds 3 tcf but is 152 bcf less than last year's levels at this period and 53 bcf above the 5-year average. The heating season begins Nov. 1.
The November contract for benchmark US sweet, light crudes lost 79¢ to $62.41/bbl Oct. 19 on the New York Mercantile Exchange, while the December position fell by 93¢ to $61.51/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 80¢ to $62.41/bbl. Gasoline for November delivery plunged by 5.89¢ to $1.68/gal on NYMEX. Heating oil for the same month declined by 2.08¢ to $1.91/gal.
However, the November natural gas contract increased by 12.8¢ to $13.55/MMbtu on NYMEX, "as early buying on concerns Hurricane Wilma could threaten Gulf of Mexico production were offset by a sharp sell-off in crude oil," said analysts at Enerfax Daily. Some traders are still concerned that Wilma could threaten eastern gulf production platforms, they said.
In London, the December contract for North Sea Brent crude lost 68¢ to $58.60/bbl on the International Petroleum Exchange. November gas oil dropped $6.25 to $584/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes declined by 77¢ to $53.64/bbl Oct. 19.
Contact Sam Fletcher at [email protected].