MARKET WATCH: Potential storm boosts natural gas price

Sam Fletcher
Senior Writer

HOUSTON, Aug. 29 -- A declining market for corporate stocks pulled down crude prices Aug. 28, but natural gas prices strengthened with a potential storm brewing in the Atlantic midway between Africa and the Lesser Antilles and heading west.

Meteorologists and traders are watching that potential storm exactly 2 years after Hurricane Katrina struck the Louisiana coast on Aug. 28, 2005. Katrina was one of the five deadliest hurricanes in US history, with 1,800 known dead. It also was the costliest natural disaster in US history, inflicting damage estimated at $81 billion.

The current weather feature is still days from becoming a tropical depression and the peak of the 2007 hurricane season is just 2 weeks away. However, analysts in the Houston office of Raymond James & Associates Inc. said the weather activity should boost natural gas prices going into the long Labor Day holiday weekend in the US.

Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, said, "The tropical wave in the middle of the Atlantic is expected to meet more favorable development conditions. We are still in the preliminaries but its current calculated path would be favorable for an US Gulf [of Mexico] track and has been providing support to natural gas. This should be under increasing scrutiny and a potential source of support before the long weekend."

US inventories
The Energy Information Administration said Aug. 29 that commercial US crude inventories fell 3.5 million bbl to 333.6 million bbl during the week ended Aug. 24. That surpassed the consensus expectation of a 600,000 bbl draw. US gasoline stocks dropped 3.6 million bbl to 192.6 million bbl in the same period, vs. a consensus draw of 2.5 million bbl, well below average for this time of year with declines in both finished gasoline and gasoline blending components. Distillate fuel inventories increased 900,000 bbl to 129.9 million bbl, slightly more than the consensus build of 800,000 bbl. Propane and propylene inventories also increased 900,000 bbl, to 54.3 million bbl.

Imports of crude into the US declined 993,000 b/d to 9.8 million b/d in the week ended Aug. 24. Input of crude into US refineries dropped 258,000 b/d to 15.5 million b/d, with refineries operating at 90.3% of capacity. Gasoline production fell to 9.1 million b/d with distillate fuel production down to 4.2 million b/d.

Energy prices
The October and November contracts for benchmark US light, sweet crudes lost 24¢ each to $71.73/bl and $71.14/bbl, respectively, Aug. 28 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 24¢ to $71.74/bbl. The September contract for reformulated blend stock for oxygenate blending (RBOB) fell 2.39¢ to $2.02/gal on NYMEX. Heating oil for the same month lost 1.34¢ to $2/gal.

However, the September natural gas contract escalated 21.3¢ to $5.59/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 20.5¢ to $5.56/MMbtu.

In London, the October IPE contract for North Sea Brent crude fell 40¢ to $70.55/bbl. The September gas oil contract gained $9.25 to $626.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 reference crudes rose 46¢ to $68.19/bbl.

Contact Sam Fletcher at [email protected].