MARKET WATCH: Supply issues push up energy prices
Sam Fletcher
Senior Writer
HOUSTON, May 20 -- Oil prices continued to climb May 19 after Algerian Energy Minister Chakib Khelil, current president of the Organization of Petroleum Exporting Countries, said that group will not consider increasing production until their next meeting Sept. 9.
But Saudi Arabia has already said it increased its oil production a "sufficient" 300,000 b/d to 9.45 million b/d on May 10 in response to requests from 50 customers (OGJ Online, May 19, 2008). The "fly in the ointment" is that the production increase is heavy crude that only some refiners can use, said analysts at Pritchard Capital Partners LLC, New Orleans.
In other news, Holly Corp.'s 85,000 b/d Navajo refinery in Artesia, NM, is operating at reduced rates of 30,000 b/d after its FCC unit was shut down for repairs. An instrument control malfunction shut down of the FCC unit on May 7. Catalyst circulation problems during restart forced another shutdown May 16. Holly expects repairs to require several days (OGJ Online, May 19, 2008).
The May 19 trading session in the New York market "continued to highlight the recent split in direction by crude and natural gas futures prices," said Pritchard Capital analysts. "After trading generally in the same direction over the last several months, some independent movement has appeared over the last week and a half," they said.
Analysts in the Houston office of Raymond James & Associates Inc. said the Department of Energy petroleum inventories report on May 21 is expected to show US crude and distillate inventories increased week as US refiners likely boosted production in the week ended May 16.
Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, noted that per-share prices of many publicly traded refining companies have fallen by an average of 50% since mid-2007 (vs. a 7% decline in the S&P 500) due primary to weak demand for gasoline and other refined products. "Poor fundamentals have reduced earnings and cash flow for all refiners, especially the companies that cannot process a significant amount of heavy and sour crude oils," Rousseau said. However, he said, "We…don't envision conditions deteriorating from these levels as refiners have reduced supply to be more in-line with lower demand."
Energy prices
The June contract for benchmark US light, sweet crudes hit a new intraday trading high of $127.77/bbl before closing at a record $127.05/bbl, up 76¢ for the day on the New York Mercantile Exchange. The July contract gained 68¢ to $126.72/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 76¢ to $127.06/bbl. Heating oil for June delivery dropped 2.77¢ to $3.68/gal on NYMEX. The June contract for reformulated blend stock for oxygenate blending (RBOB) gained 1.31¢ to $3.24/gal.
The June natural gas contract declined 14¢ to $10.95/MMbtu, breaking the psychological support level of $11/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 15¢ to $11.10/MMbtu.
In London, the July IPE contract for North Sea Brent crude inched up 7¢ to $125.06/bbl. Gas oil for June dropped $2.75 to $1,198.75/tonne.
The average price for the OPEC's basket of 13 reference crudes dipped by 3¢ to $119.24/bbl on May 19.
Contact Sam Fletcher at [email protected].