Sam Fletcher
Senior Writer
HOUSTON, Sept. 4 -- Energy futures prices were mixed Wednesday as traders looked for new indications of which way markets may move.
Unleaded gasoline for October delivery continued to decline on the New York Mercantile Exchange, down 0.65¢ to 84.09¢ Wednesday, following the end of the peak US driving season earlier this week. Traders expect gasoline futures prices to correct upwards later this week from the sharp drop during Tuesday's trading session (OGJ Online, Sept. 3, 2003).
Meanwhile, the US Department of Energy is launching another investigation of the industry, this time to determine if anyone manipulated the market to produce the spike in US gasoline prices during the last week of August. Sen. Chuck Schumer (D-NY) blamed Saudi Arabia for the fly-up in US gasoline prices, citing recent government data that indicate the kingdom sold 25% less oil to the US in August (OGJ Online, Sept. 4, 2003).
Record demand
However, a US Energy Information Administration report Thursday highlighted a primary reason for the escalation of US gasoline prices during August; US demand for gasoline averaged a record 9.4 million b/d during the 4 weeks ended Aug. 29, up 1.2% from the same period a year ago, it said.
EIA earlier reported that, during the week ended Aug. 22, US gasoline inventories fell by 5.7 million bbl to 191.2 million bbl, the lowest level since Nov. 17, 2000. US gasoline stocks grew by only 700,000 bbl in the week ended Aug. 29, despite a jump in total US gasoline imports to nearly 1.2 million b/d, "the second highest weekly average ever," EIA said Thursday.
Last week, crude inputs into US refineries averaged 15.7 million b/d, up by 244,000 b/d from the previous week. "This increase indicates that refinery operations were returning to normal, following the problems experienced in the previous week," said EIA officials.
Regardless of Sen. Schumer's concerns about sales of Saudi oil, US oil imports averaged nearly 10.1 million b/d over the last 4 weeks through Aug. 29, which was 509,000 b/d more than during the same period in 2002, said EIA.
Commercial US oil inventories increased by 1.8 million bbl to 280.4 million bbl last week. US distillates stocks rose by 2.9 million bbl to124.7 million bbl, with the increase "equally split" between diesel fuel and heating oil, EIA reported. The DOE agency's weekly report on US inventories of oil and petroleum products was delayed 1 day because of the Labor Day holiday Monday.
Energy prices
The October contract for benchmark US sweet, light crudes inched up by 8¢ to $29.49/bbl Wednesday on NYMEX, while the November position advanced by 11¢ to $29.46/bbl. However, the cash spot market for benchmark US oil lost 5¢ to $29.53 FOB Wednesday.
Heating oil for October delivery gained 0.45¢ to 77.54¢/gal. Natural gas for the same month was up by 5.5¢ to $4.69/Mcf in a flurry of short trading Wednesday on NYMEX, as traders scrambled to cover open sales positions after the market on Tuesday touched a new low for the year at $4.55/Mcf.
In London, the October contract for North Sea Brent oil gained 22¢ to $27.74/bbl Wednesday on the International Petroleum Exchange. However, the October natural gas contract lost 4.2¢ to the equivalent of $2.98/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes continued to slip Thursday, down 66¢ to $26.86/bbl. It marked the first time since Aug. 1 that the OPEC basket price has remained within the $22-28/bbl target range for 2 consecutive days.
Natural gas outlook
In a separate report Thursday, EIA said 70 bcf of natural gas were injected into US underground storage during the week ended Aug. 29. That was up from 53 bcf the previous week and 65 bcf during the same period last year but at the low end of Wall Street's projections for the latest period. US natural gas storage now totals 2.4 tcf, down 392 bcf from year-ago levels and 175 bcf below the 5-year average for this period.
Gas injections into US underground storage during the last 2 weeks reflect "backed-out demand" of 4 bcfd from the US market for natural gas, down from roughly 5 bcfd during the first 2 weeks of August and a peak of nearly 7 bcfd during much of June, said Robert S. Morris, Banc of America Securities LLC, New York. If that demand decrease continues at the lower rate of 4 bcfd, he said, total US natural gas storage at the start of the peak winter season on Nov. 1 will be closer to 3 tcf, rather than 3.1 tcf as recently projected.
Injections of natural gas into US underground storage during June-August outpaced last year's injection rates by nearly 4 bcfd on average, Morris said Thursday. The move by customers with dual-fuel capabilities to switch from natural gas to cheaper supplies of distillate fuel oil earlier this year increased the pace of gas injections this summer by some 3.3 bcfd, compared with the same period in 2002, he reported.
"However, July and August 'bid-week' prices favored natural gas over distillate fuel oil and, consequently, our models indicate that around 2-2.5 bcfd of this 'lost' demand has now been recaptured due to customers switching back to natural gas from distillate," said Morris. The so-called "bid week" is usually the last 3 business days of each month when major customers with dual fuel capabilities decide the type and amount of fuel to purchase for the coming month.
Contact Sam Fletcher at [email protected]
