Sam Fletcher
Senior Writer
HOUSTON, Aug. 28 -- Energy futures prices fell Wednesday, led by a plunge in gasoline futures on the New York Mercantile Exchange as speculative funds took profits from the previous rally in that market.
The momentum of the resulting sell off increased as stop-loss orders for automatic sales were triggered as lower price levels were breached, analysts said.
The September contract for unleaded gasoline plummeted by 4.94¢ to $1.03/gal Wednesday on NYMEX. That contract, which expires Friday, has fallen about 8% from a 5 ½-month high of $1.12/gal Monday.
The American Petroleum Institute late Wednesday reported US gasoline stocks fell by 3.6 million bbl to 194.3 million bbl during the week ended Aug. 22. US oil inventories increased by 3.7 million bbl to almost 283 million bbl during the same period, said API, while distillate stocks were up 1.7 million bbl to 120.2 million bbl.
The US Energy Information Administration earlier reported US crude stocks declined by 200,000 bbl to 278.6 million bbl last week, while gasoline inventories fell by 5.7 million bbl to 191.2 million bbl, the lowest level since Nov. 17, 2000 (OGJ Online, Aug. 27, 2003).
NYMEX prices
The October contract for benchmark US sweet, light crudes fell by 74¢ to $31.21/bbl Wednesday on NYMEX, while the November position lost 61¢ to $30.93/bbl. On the spot cash market, the price for benchmark US oil dropped by 75¢ to $31.23 FOB on Wednesday.
Meanwhile, oil workers in Nigeria announced a 2-day protest and strike against Shell Petroleum Development Co., which accounts for more than half of that country's oil production. Workers claimed to have shut down operations at the company's headquarters in Lagos and its offices in Warri and Port Harcourt in an effort to force management to meet with the union issues involving the restructuring of that Shell unit.
Heating oil for September delivery plunged by 2.17¢ to 80.67¢/gal on NYMEX. The expiring September natural gas contract fell 11.1¢ to $4.93/Mcf, primarily because of "weather forecasts pointing to weaker energy demand next week. Prices were also pressured by weaker crude oil futures and a lack of storm activity threatening Gulf of Mexico production," analysts said Thursday at Enerfax Daily.
"Traders continued to dismiss for now three storms in the Atlantic and Caribbean, saying they were still no threat to Gulf of Mexico production," said Enerfax analysts. "However, September is the peak of the Atlantic hurricane season."
Natural gas storage
EIA early Thursday reported 53 bcf of natural gas were injected into US underground storage during the week ended Aug. 22, down sharply from 78 bcf the previous week and well below the 70-80 bcf projected by some market analysts. US gas storage now stands at 2.5 tcf, which is 397 bcf less than during the same period last year and 187 bcf below the 5-year average.
"Importantly, there were no revisions reported," said Robert S. Morris, Banc of America Securities LLC, New York.
Earlier this week, EIA posted its monthly tabulation of US gas storage levels, showing the amount of working gas in storage totaled 899.9 bcf at the end of April, the latest month for which complete figures are available because of the different methods EIA uses in figuring weekly and monthly storage. However, Morris noted that EIA's figures for the month of April are "nearly 100 bcf higher" than the total of its weekly tabulations during that period.
"There is almost always a discrepancy between the monthly data and what is indicated by the weekly data. However, this discrepancy has continued to expand over the past 7 months, which has recently spurred speculation with regard to 'true' storage levels currently," Morris said.
EIA's weekly storage data are extrapolated, or "grossed up," from a sampling of 45 storage operators who account for "93% of the working gas in storage in the East consuming region, 94% of the working gas in the West consuming region, and 90% of the working gas in the producing region," he said.
EIA's monthly storage figure is based on full data from all 115 natural gas storage operators in the US. It takes time to collect and process that data, so the monthly figures "have been about 4 months delayed."
After EIA took over from the American Gas Association the responsibility for reporting weekly natural gas injections into underground storage in May 2002, it at first used a ratio of the monthly data and the weekly extrapolations in calculating storage. "Through August 2002, this ratio was adjusted every month when the most recent monthly data were posted, which appears to have provide a self-correcting effect on the weekly (vs.) monthly discrepancy over time," Morris said. "However, in order to avoid frequent revisions to the weekly injections, the EIA in September 2002 decided to stop changing the ratio in (its) equation every month and has since been utilizing a constant ratio." EIA now only discloses weekly revisions of more than 7 bcf.
If the discrepancy in weekly and monthly storage data continues to expand, EIA will have to address the problem at some point, said Morris. However, he said, any significant revision could "call into question" EIA's credibility and the reliability of its weekly figures for natural gas injections.
Other energy prices
In London, the October contract for North Sea Brent oil lost 59¢ to $29.18/bbl Wednesday on the International Petroleum Exchange. Brokers said that market was overbought at nearly $30/bbl and that traders needed to sell stale long positions. The September natural gas contract fell by 3.8¢ to the equivalent of $2.22/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined by 27¢ to $28.77/bbl Wednesday.
