Sam Fletcher
Senior Writer
HOUSTON, Jan.22 -- Even as industry officials were trying to assess damage from an earlier explosion that destroyed 3 of 6 trains at the Skikda LNG complex in Algeria, oil and natural gas prices fell Wednesday on futures markets in New York and London.
Initial reports indicated that the explosion Tuesday was likely triggered by maintenance failures at a boiler not directly associated with the natural gas liquefaction plant. Nonetheless, various industry officials worried that the disaster might impact other pending LNG projects, whether under construction or in planning.
There were no initial reports of damage to an adjacent 300,000 b/d refinery at Skikda, but officials said that facility was shut down following the blast (OGJ Online, Jan. 21, 2004).
The new near-month March contract for benchmark US sweet, light crudes dropped 29¢ to $34.58/bbl Wednesday on the New York Mercantile Exchange, while the April position fell 31¢ to $34/bbl. On the US spot market, WTI retreated to $34.98/bbl from Tuesday's corrected price of $36.23/bbl.
Futures market prices for petroleum products firmed Wednesday, however. Heating oil for February delivery jumped by 1.04¢ to $1.029/gal on NYMEX. Gasoline for the same month inched up by 0.35¢ to $1.02/gal.
Oil futures prices declined after an appellate court in Nigeria ordered the Nigerian Labor Congress to suspend a national strike scheduled Wednesday to protest the government fuel tax that was implemented Jan. 1 (OGJ Online, Jan. 21, 2004). The court also ordered the government to rescind the controversial tax. An additional court hearing is scheduled Jan. 26.
However, analysts denied that the drop in energy futures prices Wednesday signaled a new downward trend or lack of confidence in the market. Instead, they said prices were expected to rally if ministers of the Organization of Petroleum Exporting Countries vote to retain their current production quotas at the special meeting scheduled in early February. OPEC officials so far have indicated that is their plan.
US oil inventories increase
In a report delayed 1 day by the US holiday commemorating civil rights leader Martin Luther King,, the US Energy Information Administration said Thursday that US commercial crude oil inventories increased by 1.2 million bbl to 265.2 million bbl during the week ended Jan. 16. Oil stocks remained 33.4 million bbl below the 5-year average for this time of year, however.
Distillate fuel inventories fell by 2.8 million bbl to 135.5 million bbl during the same period, with decreases seen in both diesel fuel and heating oil. Gasoline inventories rose by 1.1 million bbl to 209.5 million bbl.
US crude imports averaged 9.8 million b/d during the week ended Jan. 16, up by 589,000 b/d and essentially reversing the previous week's drop in imports. Most of the increase was on the West Coast. Distillate fuel imports averaged 473,000 b/d during that period, the highest weekly average since the week ended Aug. 1, 2003. Total US gasoline imports also increased , averaging 689,000 b/d.
Crude input into US refineries during the observed period averaged less than 14.9 million b/d, down by 184,000 b/d from the previous week and 514,000 b/d over a 2-week period. "The vast majority of the decline was on the East Coast, while crude oil inputs on the Gulf Coast averaged about 7.1 million b/d," said EIA officials.
Total product supplied during a 4-week period ended Jan. 16 averaged nearly 19.7
million b/d, or 1.6% less than in the same period last year. Gasoline demand over the4-week period averaged nearly 8.6 million b/d, or 1.4% below year-ago levels. Distillate
fuel demand was down 9.8% in that period, while kerosene-type jet fuel demand was down 8.1%.
Natural gas prices impacted
The February natural gas contract lost 14.1¢ to $6.15/Mcf Wednesday on NYMEX. However, analysts expect that price to rebound as another wave of cold weather sweeps into key US markets.
"Forecasters are calling for below-normal temperatures for the North East and Midwest through January after frigid readings [recently] boosted natural gas and electricity use to record levels from Philadelphia to Quebec," said analysts Thursday at Enerfax Daily.
Meanwhile, Chakib Khelil, Algeria's minister of energy and mines, said Wednesday that Algeria would honor gas delivery commitments to European customers through increased deliveries of natural gas through two existing pipelines to replace the lost liquefied natural gas supplies.
He also announced plans to build 2 new LNG facilities on the site of the 3 destroyed units, using "a new process" that would double the previous production capacity. That construction would cost $800 million and is expected to be funded by insurance payments, Algerian officials said.
Mohamed Meziane, chairman of Sonatrach, Algeria's national oil and gas company, said the destroyed units represented half of the total production capacity of the Skikda LNG complex, which produced 11.5 million cu m of LNG last year, equivalent to 8 billion cu m of natural gas.
US gas storage
EIA also reported Thursday that 156 bcf of natural gas were withdrawn from US underground storage during the week ended Jan. 16, up from 153 bcf withdrawn during the previous week but down from 219 during the same period in 2003 and below the consensus of 176-182 bcf among Wall Street analysts
That dropped US gas storage to 2.26 tcf, representing surpluses of 282 bcf compared with the same period in 2003 and 193 bcf over the 5-year average.
Other energy prices
In London, the March contract for North Sea Brent oil lost 37¢ to $30.86/bbl Wednesday on the International Petroleum Exchange. Gas oil for February delivery dipped by 75¢ to $284.50/tonne. The February natural gas contract jumped by 28¢ to the equivalent of $5.52/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes lost 27¢ to $30.74/bbl Wednesday.
Contact Sam Fletcher at [email protected]
