MARKET WATCHStorm fails to halt fall of natural gas futures price

Energy futures prices generally declined Monday as traders in New York and London decided that the first hurricane of the 2003 Atlantic season posed no major threat to offshore production in the Gulf of Mexico or to refineries along the Gulf Coast.

July 15, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, July 15 -- Energy futures prices generally declined Monday as traders in New York and London decided that the first hurricane of the 2003 Atlantic season posed no major threat to offshore production in the Gulf of Mexico or to refineries along the Gulf Coast.

Tropical Storm Claudette strengthened into a hurricane Monday night over the gulf, with maximum sustained winds of 75 mph. It was expected to come ashore Tuesday afternoon near Port O'Connor, Tex., a small resort and fishing port located on the South Texas coast between Houston and Corpus Christi. The town was nearly destroyed by two previous hurricanes, once in 1919 and again by Hurricane Carla in 1961.

All of the Texas coastline was under weather advisories Tuesday, with a hurricane warning extending from Baffin Bay south of Corpus Christi to near the Louisiana state line. Minor flooding was reported in coastal areas south of Houston.

Workers were evacuated from 190 offshore platforms and 37 rigs in the gulf, the New Orleans regional office of the US Minerals Management Service said Monday. It reported more than 1 bcfd of natural gas production and 209,516 b/d of oil output were shut in ahead of the storm. That amounted to 7.2% of the natural gas and 13.1% of the oil produced daily from the gulf, MMS officials said.

Gas price falls
Despite that lost production, the August natural gas contract continued to fall Monday on the New York Mercantile Exchange, losing 5.2¢ to $5.10/Mcf. That amounted to a total loss of 41.8¢/Mcf over three consecutive sessions in reaction to an Aug. 11 report of a larger-than-expected build in natural gas storage.

The gas futures market remained "pressured by moderate weather forecasts this week and a softer cash market despite Gulf of Mexico production cuts," said analysts Tuesday at Enerfax Daily. "While several producers have shut in some volumes as they evacuated platforms ahead of the storm, most major interstate pipeline systems reported little or no impact."

Meanwhile, they reported, "Technical traders say the market is oversold and due for a bounce, particularly after a 7% dive late last week. With support at the recent $5.08(/Mcf) low broken (Monday), psychological support is seen at $5(/Mcf) and more buying expected in the high $4.80s."

Oil prices
The August contract for benchmark US sweet, light crudes dipped by 1¢ to $31.27/bbl Monday on NYMEX, while the September position remained unchanged at $31.05/bbl. However, unleaded gasoline for August delivery lost 0.32¢ to 94.15¢/gal. Home heating oil for the same month was down 0.03¢ to 80.62¢/gal.

In London, the August contract for North Sea Brent oil lost 23¢ to $28.96/bbl Monday on the International Petroleum Exchange. The August natural gas contract gained 2.1¢ to the equivalent of $2.74/Mcf on IPE.

Brokers reported the London oil futures market remained bullish following a call by the Paris-based International Energy Agency for members of the Organization of Petroleum Exporting Countries not to cut production at their upcoming July 31 meeting in Vienna.

Chakib Khelil, Algeria's oil minister, said Monday that he is satisfied with the current level of international oil prices. Although he insisted that it's too early to speculate on that meeting, Khelil expressed confidence that OPEC members will take the necessary measures to keep oil prices within the group's targeted range of $22-28/bbl.

The average price for OPEC's basket of seven benchmark oils lost 12¢ to $28.02/bbl Monday.

Contact Sam Fletcher at [email protected]