MARKET WATCHTropical storm threat inflates oil futures prices

Sam Fletcher
Senior Writer

HOUSTON, July 1 -- Futures prices for oil and petroleum products jumped Monday as Tropical Storm Bill roared through the central Gulf of Mexico and threatened coastal refineries as it came ashore in south Louisiana.

However, Louisiana refineries Tuesday were reported largely unaffected by power outages and torrential rain from the storm. The biggest concentration of US refining capacity stretches along the western and central Gulf Coast from Corpus Christi, Tex., to New Orleans.

Bill made landfall Monday in south-central Louisiana, sparking power outages and isolated flooding of low-lying areas in coastal counties, with as much as 10-15 in. of rain in some spots. It also stirred up two possible tornados near New Orleans. Flash flood warnings were issued along the Gulf Coast from Louisiana to Pensacola, Fla.

In New Orleans, built behind levees below the water level of the adjacent Mississippi River, local businesses sent employees home ahead of the storm. As a precautionary measure to marshal state resources, Louisiana Gov. Mike Foster declared a statewide state of emergency Monday afternoon. In Mississippi, a state of emergency was declared for three counties with low-lying areas.

Bill appeared to weaken into a tropical depression Tuesday as it moved northeastward into Mississippi, although rainstorms were still predicted along its pathway.

Concerns about possible disruptions of crude supplies by the latest labor strike in Nigeria also helped push up prices, analysts said. However, they said the latest price rally is unlikely to continue unless actual supply problems occur.

Energy prices
The August contract for benchmark US sweet, light crudes jumped 92¢ to $30.19/bbl Monday on the New York Mercantile Exchange, while the September position advanced by 87¢ to $28.74/bbl. The expiring July contract for unleaded gasoline gained 2.16¢ to 86.99/gal, while the expiring July heating oil contract rose by 2.13¢ to 78.08¢/gal. The new near-month August gasoline contract shot up by 2.47¢ to 87.27¢/gal. Heating oil for the same month was up 2.37¢ to 78.58¢/gal.

The August natural gas contract inched up by 4.9¢ to $5.41/Mcf Monday as it followed the spot gas cash market and oil prices higher.

"Gas consumption has become more sensitive to weather, and we have yet to see what impact hot weather will do to (gas) injections" into US underground storage this summer, said Ron Denhardt, vice-president, natural gas services, at Strategic Energy & Economic Research Inc., Winchester, Me.

"During the last 3 weeks, working gas storage injections have averaged 5 bcfd higher than in 2002," Denhardt reported Tuesday. "If working gas storage injections (for the rest of this summer) average 4 bcfd above last year, storage will be close to full by the end of October."

In London, the August contract for North Sea Brent oil jumped by $1.03 to $28.33/bbl on the International Petroleum Exchange. However, brokers predicted that price would likely fall with profit taking before rallying again. The August natural gas contract lost 4.9¢ Monday to the equivalent of $2.84/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 56¢ to $27.11/bbl Monday.

Contact Sam Fletcher at [email protected]