Sam Fletcher
Senior Writer
HOUSTON, Sept. 22 -- Futures prices for crude and petroleum products continued to decline Friday, as the market premium previously prompted by Hurricane Isabel evaporated with the remnants of that storm over the eastern US seaboard.
With virtually no damage from the quickly weakening storm to refineries or other energy-related facilities or disruption of deliveries, market worries about gasoline and heating oil supplies also quickly dissipated. However, some analysts claimed that markets oversold in the wake of the storm, pushing prices below the real market fundamentals.
Still, a greater-than-expected build in US inventories of crude and petroleum products dropped oil futures prices to a 4-month low last week on the New York Mercantile Exchange. The decline in oil prices also weighed on natural gas futures prices, following a report last week that injections of gas into US underground storage jumped to a record level for the period ended Sept. 12 (OGJ Online, Sept. 18, 2003).
The latest large level of natural gas injection reflects a backed-out US demand for gas equal to 4 bcfd, which should put total US gas storage closer to 3 tcf, rather than 3.1 tcf, at the start of November, said Robert S. Morris, Banc of America Securities LLC, New York, in a Monday report.
Morris also reported that members of the Organization of Petroleum Exporting Countries have indicated that they will likely not change their production quotas at their upcoming meeting Wednesday in Vienna. "Instead, OPEC discussions are likely to focus on the return of Iraq oil to the market (Iraq will be invited to attend a meeting for the first time since the fall of Saddam Hussein's regime) and the continued strong production growth from non-OPEC countries," he said.
Meanwhile, Petroleos de Venezuela SA, the state oil company of Venezuela, a founding member of OPEC, is reported to be considering building a candle factory at Santa Ana, in Anzoategui state, near the company's 5,200 b/d San Roque refinery. PDVSA officials noted that refinery produces 50-65 tonnes/day of paraffin, which is used in the manufacture of candles as well as other products.
Energy prices
Unleaded gasoline for October delivery fell by 1.47¢ to 78.7¢/gal Friday on NYMEX, as eastern US refineries appeared to survive Hurricane Isabel. Heating oil for the same month lost 0.85¢ to 69.89¢/gal. The October contract for benchmark US light, sweet crudes declined by 14¢ to $27.03/bbl, while the November position was down by 17¢ to $27.07/bbl.
Natural gas was the lone gainer Friday, with the October contract edging up by 1.2¢ to $4.48/Mcf on NYMEX. "A soft cash market and a bearish weekly storage report [was] offset somewhat by short covering [purchases by traders holding an excess of open sales contracts] ahead of the weekend," explained analysts Monday at Enerfax Daily.
They said, "Reduced power demand in Mid-Atlantic states hit by Hurricane Isabel helped crush the weekend cash market. While some traders expect the steep cash discount to winter futures, now more than 80¢[/Mcf], to limit the downside, the bearish technicals after last week's 6% slide should trigger more selling."
In London, the price for near-month North Sea Brent oil declined on the International Petroleum Exchange for the seventh successive session, as aggressive afternoon sales erased Friday morning gains. The November Brent contract closed at $25.32/bbl Friday, down 27¢ for the day after trading at $25.10-25.75/bbl. So far, price support has held above $25/bbl on IPE, but brokers expect prices to fall through that level this week, barring any turnaround in the market.
The October natural gas contract inched up by 1.3¢ Friday to the equivalent of $3.15/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes lost 8¢ to $24.82/bbl Friday. For all of last week, however, the average price was down by 96¢ to $25.48/bbl from the previous week.
So far this year, OPEC's basket price has averaged $27.94/bbl, up from $24.36/bbl for all of 2002.
Contact Sam Fletcher at [email protected]
