MARKET WATCHEnergy futures markets remain mixed

Sam Fletcher
Senior Writer

HOUSTON, July 16 -- Oil futures prices advanced Tuesday in expectation of bullish reports on US inventories of crude and petroleum products, due Wednesday, while natural gas futures prices continued to fall because of recent builds in storage.

Hurricane Claudette, a minimal Category 1 storm that began dissipating over South Texas early Wednesday, exerted little influence on futures trading at the New York Mercantile Exchange this week.

However, the New Orleans regional office of the US Minerals Management Service said the first hurricane of the 2003 Atlantic season forced evacuation of offshore personnel from 264 platforms and 41 rigs in the Gulf of Mexico. That amounted to 6.5% of the platforms and 29.3% of the rigs currently operating in those waters, officials said.

It also triggered shut-ins of 332,942 b/d of oil and 2.5 bcfd of natural gas. That's equivalent to 20.8% of the 1.6 million b/d and 18.1% of the 14 bcfd of gas currently produced from the gulf, said MMS officials.

Natural gas prices
Despite that disruption of operations in the Gulf of Mexico, the August natural gas contract lost 8.2¢ to $5.02/Mcf Tuesday on NYMEX. Traders failed in three tries to break through a $5/Mcf floor as several sold the "long" commodity contracts they were holding.

The natural gas futures market could continue its slide, although a strong natural gas cash market and higher oil futures prices could limit its downside, said analysts Wednesday at Enerfax Daily. The reduction of gulf gas production as a result of Claudette could boost the cash market to a premium over NYMEX, they said.

"Technical traders said the market is oversold and due for a bounce, particularly after a 9% dive in the last four sessions," Enerfax reported.

US oil market
The August contract for benchmark US light, sweet crudes gained 35¢ to $31.62/bbl Tuesday on NYMEX, while the September position advanced by 6¢ to $31.11/bbl. Heating oil for August delivery jumped by 0.71¢ to 81.33¢/gal. Unleaded gasoline for the same month fell by 0.92¢ to 93.23¢/gal.

The growth of US demand for gasoline during the first half of this year has been the weakest since the 1990-91 recession, the American Petroleum Institute reported Wednesday (OGJ Online, July 16, 2003). In the same 6 months, it said, there was an "unprecedented" double-digit, 2-year decline in jet fuel demand.

US imports of crude and petroleum products in June totaled 12.4 million b/d, or 62.4% of total US demand, said API. That was up from 11.7 million b/d, or 59.1% of US demand during the same month last year.

In its annual report, the National Petrochemical & Refiners Association said Wednesday there were 149 operable refineries in the US at the start of this year, down from 153 a year earlier. It said US refining capacity slipped by 28,000 b/d to 16.8 million b/d at the start of this year but remained above capacity levels reported for 1999-2001.

Other prices
In London, the August contract for North Sea Brent oil gained 21¢ to $29.17/bbl on the International Petroleum Exchange. Brokers said prices rose after Claudette was upgraded to a hurricane.

The August natural gas contract dipped by 0.65¢ to the equivalent of $2.70/Mcf Tuesday on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 4¢ to $27.98/bbl Tuesday.

Contact Sam Fletcher at [email protected]