Sam Fletcher
Senior Writer
HOUSTON, Oct. 7 -- Energy prices continued to fall Oct. 6 as markets focused on a possible drop in demand because of recent high prices, despite a sluggish recovery of oil and gas production from the Gulf of Mexico.
The US Minerals Management Service said crews still had not returned to 289 platforms and 6 drilling rigs in the Gulf of Mexico as of Oct. 6. It reported shut-in production totaling 1.2 million b/d, or 80.2% of normal crude production, and 6.6 bcfd, or 66.3% of normal gas output from those waters. Cumulative production lost from the federal waters of the gulf since Aug. 26 now totals 48.96 million bbl of crude and 240.1 bcf of natural gas.
However, the Energy Information Administration reported the injection of 44 bcf of natural gas into US underground storage during the week ended Sept. 30. That was at the lower end of Wall Street analysts' consensus and compared with injections of 53 bcf the previous week and 81 bcf during the same period last year. Just 3 weeks before the Nov. 1 start of the winter heating season, US gas storage now stands at 2.9 tcf, down by 151 bcf from year-ago levels but 40 bcf above the 5-year average.
The latest EIA data indicated no material incremental "backed-out" demand for natural gas, said Robert S. Morris at Banc of America Securities LLC, New York.
Storm effects
Morris noted that Chemical Market Associates Inc. previously estimated that 50-60% of North American steam cracker ethylene capacity had shut down along the Gulf Coast because of recent hurricanes but that half of the idle capacity has since been restored. "We estimate that typically the US ethylene industry represents about 3% of total annual domestic natural gas consumption," he said.
Nearly 60% of US ethylene production is derived from ethane, and only 5% of US ethane crackers have the flexibility to switch to other feedstocks, Morris said.
The Louisiana Office of Conservation said Oct. 6 that 515.4 MMcfd of natural gas production onshore and in state waters has been restored within a 38-parish region of that state, but 42.6% of the wells in that area remain shut-in. The office has not received information on 39.2% of the oil and gas wells in the region, however. The region's prehurricane gas production capacity is estimated at 2.2 bcfd (OGJ Online, Oct. 6, 2005).
Noble Corp. said its semisubmersible Noble Max Smith will be taken into a Pascagoula, Miss., shipyard for repair, while its submersible Noble Joe Alford will be repaired at a Sabine Pass, Tex., facility. The company is ordering material for prefabrication of steel for repairs to the Noble Max Smith semisubmersible.
Officials said the semisubmersible Noble Jim Thompson was earlier damaged by Hurricane Katrina but suffered no significant incremental damage from Rita. The firm is working with customers to locate and recover anchors and chains that separated from some units' mooring systems during the storms. However, officials said five vertically loaded anchors (VLAs) on the semisubmersible Noble Lorris Bouzigard and eight VLAs on the semisubmersible Noble Therald Martin will not be recoverable and will need to be replaced.
The company estimates the Thompson, Bouzigard, and Martin, along with semisubmersibles Noble Paul Romano and Noble Amos Runner, will return to operational status this month, with the Alford returning in late December and the Smith returning in the first quarter of 2006.
Sabine Pipeline LLC, operator of the Henry Hub, La., gas collection point, has lifted its force majeure for gas flows at 12 of the 14 pipeline interconnects at the hub (OGJ Online, Oct. 6, 2005).
Meanwhile, to help relieve fuel shortages, the US Environmental Protection Agency extended the waiver allowing high sulfur diesel fuel to be used on highways until Oct. 25 in Alabama, Arkansas, Georgia, Florida, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Tennessee, Texas, and Virginia.
Energy prices
The November contract for benchmark US light, sweet crudes plunged by $1.43 to $61.36/bbl Oct. 6, a 2-month low for a front-month contract on the New York Mercantile Exchange, while the December contract dropped $1.63 to $61.06/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.43 to $61.37/bbl. Gasoline for November delivery fell by 6.73¢ to $1.84/gal on NYMEX. Heating oil for the same month lost 6.41¢ to $1.95/gal.
The November natural gas contact plummeted by 80.8¢ to $13.38/MMbtu on NYMEX. "Despite the lifting of force majeure at several more interconnects along Sabine's pipeline this week, it was still unclear when the Henry Hub trading point would resume full service," said analysts at Enerfax Daily.
In London, November North Sea Brent crude fell by $1.75 to $58.37/bbl on the International Petroleum Exchange. Gas oil for October plunged by $21.75 to $592.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes lost $1.59 to $54.27/bbl on Oct. 6.
Contact Sam Fletcher at [email protected].
