MARKET WATCHEnergy prices dip in profit-taking
Sam Fletcher
Senior Writer
HOUSTON, Apr. 25 -- Energy prices slipped lower Apr. 24 as traders took profits from the previous rally, but analysts said another run-up in petroleum costs is likely amid continued concerns about supply disruptions.
Ministers of the Organization of Petroleum Exporting Countries, meeting informally at an energy conference in Doha, the capital of Qatar, said they have no intention of raising their 28 million b/d official production ceiling for member countries other than Iraq. Saudi Arabia is thought to have spare production capacity of 1.7 million b/d, but that crude has a high sulfur content. When that spare capacity was offered to the market last year in the wake of hurricanes that disrupted Gulf of Mexico production, there were no buyers because most refiners need a lighter, sweeter crude.
Ethanol affects coal
Refiners are worried about having enough ethanol and the means of moving it to refineries to replace methyl tertiary butyl ether as a gasoline additive by May 6 (OGJ Online, Apr. 24, 2006). Now US electric utilities say the increased competition for railroad transportation capacity may leave them short of coal to meet summer demand.
Ethanol is competing with coal, coke, and grain for "very limited rail time," analysts at Enerfax Daily reported Apr. 25. "Electric utilities powering air conditioners rely on coal, especially from the coal-rich Powder River basin in Wyoming. Derailments in 2005 on lines out of that basin . . . caused coal shortages in the eastern US that utilities said are still not fully resolved," they said. Shipments of coal and ethanol to East Coast consumers will travel over the same railroad network.
Energy prices
The June contract for benchmark US light, sweet crudes fell by $1.84 to $73.33/bbl Apr. 24 on the New York Mercantile Exchange. The July contact dropped $1.51 to $76.20/bbl. On the US spot market, West Texas Intermediate lost $3.74 to $70.09/bbl. Gasoline for May delivery dropped 6.45¢ to $2.17/gal on NYMEX. Heating oil for the same month declined by 4.45¢ to $2.03/gal.
The May natural gas contract fell by 42.3¢ to $7.56/MMbtu on NYMEX as mild weather reduced demand. "It was the biggest 1-day decline since Feb. 22," said Enerfax analysts. However, they reported front-month natural gas prices still gained 4.8% this month. "Forecasters say natural gas demand will be about 15% below average through the end of the month," analysts said.
In London, the June IPE contract for North Sea Brent crude lost $1.57 to $73/bbl. However, the May gas oil contract inched up by 50¢ to $641.50/tonne.
The average price for OPEC's basket of 11 benchmark crudes increased by 53¢ to $67.37/bbl on Apr. 24.
Contact Sam Fletcher at [email protected].