MARKET WATCH: Crude prices slip, gasoline continues climb

Oil prices slipped in profit taking July 9 after a 7-day rally, but gasoline prices continued to climb in the New York market when BP was forced to shut down for unplanned maintenance a unit at its 410,000 b/d Whiting, Ind., refinery.

Sam Fletcher
Senior Writer

HOUSTON, July 10 -- Crude prices slipped in profit taking July 9 following a 7-day rally, but gasoline prices continued to climb in the New York market when BP PLC was forced to shut down for unplanned maintenance an oil processing unit at its 410,000 b/d refinery in Whiting, Ind.

According to reports, workers over the past 4 days slowly shut down a 250,000 b/d processing unit—the largest of three at that plant—after a leak was discovered in a pipe. Repairs should take at least 7 days, but the refinery has been plagued with other disruptions in recent months. In April, BP shut in half of the refinery's production because of a mechanical failure. In March a fire disrupted production at that facility, which is the fourth-largest of all US refineries and the second-largest among BP refineries worldwide (OGJ Online, Apr. 24, 2007).

That marked the second disruption of a Midwestern refinery this month. On July 1, record flooding on the Verdigris River breached a levee and flooded Coffeyville Resources LLC's 110,000 b/d refinery in Coffeyville, Kan. (OGJ Online, July 5, 2007). Those refining capacity losses "put in question the extent of the upcoming US crude stock draws," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

A July 9 report by International Energy Agency in Paris of increasing market tightness beyond 2010, with spare production capacity among members of the Organization of Petroleum Exporting Countries declining to minimal levels by 2012, helped boost benchmark US crude prices as high as $73/bbl in intraday trading on the New York Mercantile Exchange. But that advance was halted when news of problems at BP's refinery "put the spotlight back on the current US crude stock overhang," Jakob said.

Jakob also noted a July 10 report that Royal Dutch Shell PLC is restarting production of 77 million b/d from the Nembe Creek oil field in Nigeria. That production was shut in due to a pipeline leak (OGJ Online, June 12, 2007).

Energy prices
The August contract for benchmark US sweet, light crudes dropped 62¢ to close at $72.19/bbl July 9 on NYMEX. The September contract lost 54¢ to $72.61/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 62¢ to $72.20/bbl. Heating oil for August delivery dipped 0.23¢ to $2.09/gal. The August contract for reformulated blend stock for oxygenate blending (RBOB), however, increased by 3.5¢ to $2.34/gal.

The August natural gas contract dropped 3.4¢ to $6.41/MMbtu. On the US spot market, gas at Henry Hub, La., jumped by 23.5¢, also to $6.41/MMbtu. "After trading down for 5 trading days, natural gas is up over [10¢/MMbtu] in the premarket [electronic trading]," said analysts July 10 at the Houston offices of Raymond James & Associates Inc. "Gas has come down nearly 15% in the last month. Currently, there is 84 bcf less gas in [US underground] storage than the same time last year," they said.

In London, the August IPE contract for North Sea Brent crude inched up 16¢ to $75.78/bbl. The July gas oil contract increased $1.75 to $646/tonne.

The average price for OPEC' basket of 11 benchmark crudes advanced by 22¢ to $71.36/bbl on July 9.

Contact Sam Fletcher at samf@ogjonline.com.

More in General Interest