HOUSTON, Sept. 21 -- Energy prices continued falling Sept. 20, with crude approaching a $60/bbl floor that members of the Organization of Petroleum Exporting Countries might be willing to defend.
OPEC no longer has a specified target range of prices for its crude. However, Iran's oil minister recently said he would like to see crude prices remain above $60/bbl.
In a Sept. 20 interview, Saudi Arabian Oil Minister Ali I. al-Naimi said current oil prices are reasonable and cause no major damage to global economic growth. Decreased demand has reduced Saudi Arabia's crude production, but it has not fallen below 9.1 million b/d, he said.
The US Energy Information Administration reported commercial US crude inventories fell by 2.8 million bbl to 324.9 million bbl during the week ended Sept. 15. Gasoline stocks increased by 600,000 bbl to 207.6 million bbl during the same period. Distillate fuel inventories jumped by 4.1 million bbl to 148.7 million bbl (OGJ Online, Sept. 20, 2006). That report showed "continued strength in gasoline demand vs. last year, as well as larger than expected declines in crude inventories," said analysts in the Houston office of Raymond James & Associates Inc.
"With crude production growth in Russia slowing down, Russia is again putting pressure on foreign exploration and production companies to increase production," said Raymond James analysts. "The Russian Natural Resources Ministry announced a new review of Total SA's license for Arctic Kharyaga drilling. The ministry filed a complaint saying the French company isn't producing enough oil as it should be. This follows on the heels of a June demand by the Russian government that Total SA pay fines for drilling an insufficient number of wells to maintain a planned extraction rate. This follows a series of measures on foreign oil companies as Russia seems intent on exerting ever greater control of its energy industry," they said.
The expiring October contract for benchmark US sweet, light crudes dropped $1.20 to $60.46/bbl Sept. 20 on the New York Mercantile Exchange. The November contract was down $1.43 to $60.74/bbl. Heating oil for October delivery fell by 4.38¢ to $1.65/gal on NYMEX. Unleaded gasoline for the same month lost 3.67¢ to $1.47/gal.
The October natural gas contract declined by 7.5¢ to $4.93/MMbtu on NYMEX in anticipation of a continued build in gas storage for winter. On Sept. 21, EIA reported the injection of 93 bcf of natural gas into US underground storage facilities in the week ended Sept. 15. That was above the consensus estimate of Wall Street analysts but down from the previous week's injection of 108 bcf. It was up from the injection of 74 bcf during the same period a year ago.
Prior to the release of EIA's latest figures, Raymond James analysts said, "Storage numbers for the last 2 weeks came in much higher than estimates, and this may be playing into today's weakness in natural gas markets."
US gas storage now totals almost 3.2 tcf, up by 356 bcf from a year ago and 352 bcf above the 5-year average.
In London, the November IPE contract for North Sea Brent lost $1.70 to $60.47/bbl. Gas oil for October dropped $24.50 to $537.50/tonne
The average price for OPEC's basket of 11 benchmark crudes fell by $2.31 to $56.54/bbl on Sept. 20.
Contact Sam Fletcher at [email protected].