MARKET WATCH: Crude prices rise as storms threaten gulf

Sam Fletcher
Senior Writer

HOUSTON, Aug. 14 -- Front-month crude prices gained slightly Aug. 13 as the fourth tropical depression of the 2007 Atlantic hurricane season strengthened overnight into Tropical Storm Dean.

At 11 a.m. EDT, Aug. 14, the storm was more than 2,450 miles southeast of Miami moving west at 23 mph into an area of the Atlantic where high sea-surface temperatures and other conditions could help it strengthen into a hurricane later this week. Meanwhile, the National Weather Service said a strong tropical wave that has been churning for several days near Mexico's Yucatan Peninsula has now moved into the southern Gulf of Mexico where it could soon grow into a tropical depression or even a tropical storm.

Crude prices were up slightly in premarket electronic trading Aug. 14 because of the potential threat to oil and gas production in the gulf, said analysts in the Houston office of Raymond James & Associates Inc.

Moreover, the Organization of Petroleum Exporting Countries on Aug. 14 raised its estimates of world oil demand by 100,000 b/d to 85.7 million b/d in 2007 and by another 100,000 b/d to 87.1 million b/d in 2008. "OPEC lowered its estimate of non-OPEC supply by 85,000 b/d to 50.3 million b/d on lower production from Norway, Mexico, and Chad," said Raymond James analysts.

Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, reported, "A bearish flag to commodities and to oil in particular is coming from the rising dollar index, which is at its highest value in more than a month. It is still considerably lower than last year or the first quarter of 2007, but developments on the dollar index should be closely watched as the West Texas Intermediate [price] rise above $70/bbl in early July coincided with the plunge in the dollar index."

Energy prices
The September contract for benchmark US light, sweet crudes traded at $71.12-73.19/bbl Aug. 13 before closing at $71.62/bbl, up 15¢ for the day as traders took some profit from the earlier rally on the New York Mercantile Exchange. October crude increased by 7¢ to $71.32/bbl, but all subsequent months registered losses while remaining in backwardation with subsequent contracts priced lower each month through December 2008. On the US spot market, WTI at Cushing, Okla., was up 15¢ to $71.62/bbl. Heating oil for September delivery slipped by 0.47¢ to $1.97/gal on NYMEX. The September contract for reformulated blend stock for oxygenate blending (RBOB) dropped 1.73¢to $1.94/gal.

The September natural gas contract fell 2.6¢ to $6.79/MMbtu Aug. 13 on NYMEX. On the US spot market, however, gas at Henry Hub, La., jumped by 49¢ to $7.12/MMbtu.

In London, the [month] IPE contract for North Sea Brent crude dropped 16¢ to $70.23/bbl. The September gas oil contract escalated by $13.75 to $631.50/tonne.

The average price for OPEC's basket of 11 reference crudes gained 75¢ to $71.62/bbl on Aug. 13.

Contact Sam Fletcher at [email protected].