MARKET WATCH: Energy prices up before big US driving day

Sam Fletcher
Senior Writer

HOUSTON, July 5 -- Energy prices continued to climb July 3 in the New York market ahead of the July 4 US Independence Day holiday when 34.5 million people were expected to take to the road in the country's biggest automobile-driving day.

"Oil prices have not skipped a beat this morning, trading higher for the seventh consecutive day and posting yet another 10-month high," said analysts July 5 at the Houston office of Raymond James & Associates Inc. "Traders will surely continue to be focused on refinery run rates, which, while remaining extraordinarily low for much of this year, have left gasoline and heating oil inventories in the US well below their 5-year average levels. Over the longer term, increased utilization, along with moderating imports to the US, should lead to a drawdown from the current elevated crude inventory levels. Continued instability in Nigeria, with attacks on oil infrastructure returning after a month-long truce, is adding to the bullish sentiment surrounding oil prices," they said.

Meanwhile, Kansas fuel marketers were seeking a temporary waiver to allow drivers of fuel tanker trucks to spend more than 11 hr/day on the road in order to transport fuel from as far away as Texas. Waivers from the usual fines from truck-driving regulations are needed to bring new supplies of gasoline and distillate fuel to a large region following the flooding of Coffeyville Resources LLC's 110,000 b/d refinery in Coffeyville, Kan. Record flooding on the Verdigris River on July 1 breached the levee in Coffeyville and flooded the refinery, its terminal, and rack, forcing tanker drivers to go to more distant terminals to obtain fuel for that area.

Officials said 18 Kansas counties had been declared disaster areas because of flooding. Closure of the privately owned independent Coffeyville refinery is reported to be hampering the fuel supply systems in Kansas, Nebraska, Missouri, and South Dakota. Fuel marketers also are seeking a similar waiver on truckers' driving hours in South Dakota, officials said.

As waters receded July 4, some Coffeyville Resources employees gained access to administrative facilities and some warehouses at the refinery and fertilizer plant. Part of the facility remained under water, however, and the company could not yet assess damage.

US inventories
The Energy Information Administration reported July 5 that commercial US crude inventories escalated by 3.1 million bbl to 354 million bbl during the week ended June 29. US gasoline stocks gained 1.8 million bbl to 204.4 million bbl in the same period but remained below average for this time of year. Distillate fuel inventories rose by 1.2 million bbl to 121.6 million bbl. Propane and propylene inventories increased by 1.9 million bbl to 43.9 million bbl in the same week.

Imports of crude into the US increased by 277,000 b/d to 10.8 million b/d during the same period. Over the past 4 weeks however, crude imports have averaged 128,000 b/d less than in the same period last year. Total gasoline imports averaged 1.4 million b/d.

The input of crude into US refineries rose by 114,000 b/d to 15.5 million b/d in the week ended June 29. US refineries were operating at 90% of capacity that week, up from 89.4% previously. Gasoline production increased slightly to 9.4 million b/d, while distillate fuel production remained relatively flat at 4 million b/d.

Energy prices
The August contract for benchmark US sweet, light crudes gained 32¢ to $71.41/bbl on July 3 on the New York Mercantile Exchange. The September contract increased by 31¢ to $71.87/bbl. On the US spot market, West Texas Intermediate was up 32¢ to $71.42/bbl. The August contract for reformulated blendstock for oxygenate blending (RBOB) gained 1.57¢ to $2.26/gal on NYMEX. Heating oil for the same month inched up 0.44¢ to $2.07/gal. The August natural gas contract dropped 1¢ to $675/MMbtu on NYMEX.

In London, the August IPE contract for North Sea Brent crude increased by 30¢ to $72.93/bbl. The July gas oil contract escalated by $9 to $634/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 18¢ to $69.73/bbl on July 4.

Contact Sam Fletcher at samf@ogjonline.com.