MARKET WATCHGasoline leads energy futures price rally on NYMEX

Led by gasoline, energy futures prices rose Tuesday on the New York Mercantile Exchange as traders reacted to the shut down of one of two catalytic reformers at Shell Deer Park Refining Co.'s 340,000 b/d complex in Deer Park, Tex.

July 9, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, July 9 -- Led by gasoline, energy futures prices rose Tuesday on the New York Mercantile Exchange as traders reacted to the shut down of one of two catalytic reformers at Shell Deer Park Refining Co.'s 340,000 b/d complex in Deer Park, Tex.

A company spokesman Wednesday told OGJ Online the unit was taken down for unscheduled—but "not unanticipated"—maintenance that could take 7-10 days to complete. There will be only a "slight reduction" in the refinery's output during that down time—"not enough to cause this kind of (market) reaction," he said.

However, traders in New York and London already were expecting bullish reports this week of reduced US gasoline inventories. With gasoline inventories already abnormally low during the peak summer driving season, any disruption of US supplies is almost certain to trigger market reaction.

Energy futures prices
The August contract for unleaded gasoline jumped by 1.83¢ to 90.46¢/gal Tuesday on NYMEX. Benchmark US light, sweet crudes for the same month rose 9¢ to $30.22/bbl, while the September contract escalated 20¢ to $29.92/bbl. Heating oil for August delivery increased by 0.43¢ to 77.91¢/gal.

The August natural gas contract gained 12.2¢ to $5.50/Mcf on NYMEX, the result primarily of "follow-through technical buying" after a 3% rally during the previous trading session, said analysts Wednesday at Enerfax Daily.

The gas futures market also was buoyed by a firmer cash market as a Northeast heat wave increased cooling demand, they said. "Power demand is up the last couple of days because of the heat, and there was some late buying on a new storm. While traders said strong cooling demand due to a heat wave in the Northeast helped firm the cash market this week and close the gap to futures, they said milder late-week forecasts could temper the buying," Enerfax analysts reported.

A tropical wave in the central Caribbean Sea was upgraded Tuesday into Tropical Storm Claudette, the third named storm of the 2003 Atlantic hurricane season. It was headed Wednesday toward Mexico's Yucatan Peninsula, prompting storm alerts in Jamaica and the Cayman Islands. Officials at the National Hurricane Center in Miami said it could reach hurricane strength before crossing over the Yucatan into the Gulf of Mexico on Friday.

London market waffles
In London, trade in North Sea Brent oil was mixed Tuesday on the International Petroleum Exchange.

Prices dropped sharply in aggressive selling early in that session on reports that the Nigerian Labor Congress ended its general strike after reaching agreement with the government on the recent hike in fuel prices in that country. Previous market fears that the strike eventually might disrupt Nigeria's oil production or exports had added about 75¢/bbl to oil prices, analysts said.

However, IPE oil futures prices rebounded in afternoon trade on expectations of a possibly substantial decline of US gasoline stocks in the weekly government and industry reports to be released Wednesday.

Brent oil for August delivery settled at $27.97/bbl Tuesday, up 15¢ for the day after trading at $27.21-28.04/bbl during the session. However, the August natural gas contract dropped 3.7¢ to the equivalent of $2.76/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 21¢ to $26.83/bbl Tuesday.

Contact Sam Fletcher at [email protected]