MARKET WATCH Energy prices generally rebound under supply threats
Sam Fletcher
Senior Writer
HOUSTON, Aug. 12 -- Energy prices generally rebounded to near-record levels Wednesday among renewed threats of attacks on oil facilities in Iraq, which has not yet full recovered its export capacity from damage caused Monday (OGJ Online, Aug. 10, 2004).
Evacuation of offshore facilities and the shutdown of some oil and natural gas production (OGJ Online, Aug. 11, 2004) ahead of Tropical Storm Bonnie in the Gulf of Mexico added to the bullishness of energy markets.
Meanwhile, Saudi Arabia said it is prepared to increase its crude production by another 1.3 million b/d if necessary to lower oil prices. In a telephone news conference Wednesday, Adel Al-Jubeir, foreign affairs advisor to Crown Prince Abdullah at the Saudi embassy in Washington, DC, said current high prices of crude are unjustified in terms of supply and demand. "We have the [production] capacity, and we are willing to use it immediately," he said.
However, Paul Horsnell, Barclays Capital Inc., London, said in a report issued Wednesday, "It is very possible not to doubt Saudi Arabia's capacity figures, not to doubt the security of [the kingdom's production] installations, and not to doubt the sincerity and firm commitment of producers to keep prices under control, and yet still believe that matters have now reached a stage where $40-plus/bbl is justified and where higher prices are possible."
US crude stocks drop
The US Energy Information Administration reported Wednesday that US crude inventories plunged by 4.3 million bbl to 294.3 million bbl during the week ended Aug. 6, while gasoline stocks fell by 1.8 million bbl to 208.3 million bbl. US distillate inventories increased by 1.3 million bbl to 122.5 million bbl during the same period.
That latest data "confirm that the rumors of the demise of US gasoline demand have been greatly exaggerated," Horsnell said. "The weekly demand number for gasoline is the strongest of the year, and US distillate demand continues to grow at a 6%-plus rate."
He said, "To be running ahead of last year's record despite a 22.9% [year-to-year] increase in retail prices implies a remarkable robustness and indeed rude health in the basic components of gasoline demand. Crude oil inventories have continued their expected fall, helped on by imports falling back to 9.52 million b/d, some 1.8 million b/d lower than the peak hit 2 weeks ago. The heating oil data [are] also fairly bullish, with the rate of seasonal build showing some signs of becoming a bit too anemic."
Energy prices
The September contract for benchmark US light, sweet crudes advanced by 28¢ to $44.80/bbl Wednesday on the New York Mercantile Exchange, while the October contract was up by 29¢ to $44.35/bbl. Gasoline for September delivery jumped by 2.73¢ to $1.2622/gal on NYMEX, and heating oil for the same month gained 0.08¢ to $1.1706/gal.
The September natural gas contract dropped by 17.7¢ to $5.61/Mcf, "wiping out Tuesday's storm-driven gains and then some as the threats to [Gulf of Mexico] production seemed to ease somewhat as the market deflated what was an overzealously hyped market," said analysts Thursday at Enerfax Daily. Bonnie made landfall Thursday in the Florida panhandle, and Hurricane Charley was expected Thursday also to miss the primary oil and natural gas production area off Louisiana and to hit Florida late Friday or early Saturday.
In London, the September contract for North Sea Brent crude increased by 29¢ to $41.57/bbl on the International Petroleum Exchange. Gas oil for August delivery lost $3.25 to $371/tonne. The September natural gas contract slipped by 1.3¢ to the equivalent of $3.86/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes inched up by 8¢ to $40.08/bbl Wednesday.
Contact Sam Fletcher at [email protected]