MARKET WATCH: Tropical storms lift energy prices
Sam Fletcher
Senior Writer
HOUSTON, Aug. 15 -- Energy prices increased Aug. 14 with reports of two tropical depressions forming into storms in the Atlantic Ocean and the central Gulf of Mexico.
The tropical depression in the gulf strengthened into Tropical Storm Erin on Aug. 15 and at 10 a.m. CDT was 250 miles east of Brownsville, Tex., with sustained winds in excess of 40 mph and moving west-northwest at 12 mph. It is expected to strengthen as it moves over the gulf's warm waters. A storm warning was issued for the Texas coast from Freeport south to the Mexico border. Squalls from the storm were already approaching Texas. Landfall tentatively was projected for late Aug. 16 in the vicinity of Corpus Christi, Tex., where there are refineries.
Meanwhile in the Atlantic, Tropical Storm Dean is continuing to organize after forming Aug. 14 and could strengthen into a hurricane "over the next day or two," meteorologists said.
Shell Oil Co. evacuated 188 workers from facilities in the Gulf of Mexico that likely would be in Erin's path. The company temporarily shut in 5 MMcfd of gas production from the North Padre Island 975 field, 75 miles southeast of Corpus Christi. Shell officials also are monitoring Tropical Storm Dean and are prepared to take action as necessary.
"The US energy complex is in a weather-trading mode and actively anticipating supply disruption," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. "The current path for Tropical Storm Dean has it less towards Northeast than [Aug. 14], hence becoming more of a potential threat to US gulf operations."
Jakob said, "Product cracks have gained in the weather scare; [North Sea] Brent [crude] on the other hand remains more exposed to the global financial risk aversion and is not able to follow the strength of West Texas Intermediate, making for a wider discount of Brent versus WTI."
US inventories
The Energy Information Administration said Aug. 15 that commercial US crude inventories fell 5.2 million bbl to 335.2 million bbl in the week ended Aug. 10. Wall Street analysts were expecting a draw of 2.5 million bbl.
Gasoline stocks dropped 1.1 million bbl to 201.9 million bbl, vs. a consensus of an 800,000 bbl pull in the same period. Gasoline inventories remain below average for this time of year, with declines in both finished gasoline and gasoline blending components. Distillate fuel inventories inched up by 200,000 bbl to 127.7 million bbl, well below the 1.3 million gain expected. Propane and propylene inventories increased 1.3 million bbl to 51.7 million bbl.
Imports of crude into the US declined by 125,000 b/d to 9.9 million b/d in the latest week. The input of crude into US refineries dipped by 8,000 b/d to 15.8 million b/d with refineries operating at 91.8% of capacity, up slightly from 91.3% the prior week. Gasoline increased to 9.3 million b/d, however, while distillate fuel production essentially was unchanged at 4.1 million b/d.
Energy prices
The September contract for benchmark US light, sweet crudes escalated by 76¢ to $72.38/bbl Aug. 14 on the New York Mercantile Exchange. The October contract gained 70¢ to $72.02/bbl. On the US spot market, WTI at Cushing, Okla., was up 77¢ to $72.39/bbl. Heating oil for September delivery increased 1.6¢ to $1.98/gal on NYMEX. The September contract for reformulated blend stock for oxygenate blending (RBOB) climbed 3.63¢ to $1.97/gal.
The September natural gas contract jumped by 14.6¢ to $6.94/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 22.5¢ to $6.90/MMbtu.
In London, the September IPE contract for North Sea Brent crude increased 28¢ to $70.51/bbl. Gas oil for September fell $16.50, however, to $615/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 reference crudes lost 56¢ to $67.71/bbl on Aug. 14.
Contact Sam Fletcher at [email protected].