MARKET WATCHEnergy prices climb as Ivan disrupts GOM production
Sam Fletcher
Senior Writer
HOUSTON, Sept.15 -- Energy futures prices jumped again Tuesday as oil and gas producers evacuated half of the manned production platforms and most of the mobile offshore rigs in the Gulf of Mexico in advance of Hurricane Ivan.
The US Minerals Management Service said Tuesday afternoon that 382 of the 764 manned platforms and 60 of the 117 mobile rigs in the gulf were evacuated. More than 1 million b/d of oil production and nearly 4.2 bcfd of gas production were shut in as a result of the category 4 storm, said MMS officials. That's equivalent to 61.3% of daily oil production and 34.1% of daily natural gas production in the Gulf of Mexico, they said (OGJ Online, Sept. 14, 2004).
Other sources reported Wednesday that Gulf Coast facilities representing 6% of total US refining capacity also were shut in ahead of the storm.
Early Wednesday, Ivan was located 180 miles south-southeast of the mouth of the Mississippi River and was moving north-northwest at nearly 12 mph, with a gradual turn to the north expected later. The National Hurricane Center predicted the eye of the storm would make landfall near Mobile Bay, Ala., early Thursday.
Tropical storm winds and rain from the hurricane lashed the coasts of Alabama, Mississippi, Louisiana, and the Florida Panhandle early Wednesday. Forecasters said Ivan may weaken but still could be a dangerous category 3 storm with 111-130 mph winds when it hits land.
Saudi Arabian promises
Meanwhile, Saudi Arabia promised Tuesday to make available 800,000 b/d of new crude by the end of this month and to keep producing vigorously in an effort to drive down prices. Saudi officials said they might support efforts to raise the production quota of the Organization of Petroleum Exporting Countries at the group's Wednesday meeting in Vienna.
In the opening address at that meeting, Purnomo Yusgiantoro, OPEC's conference president and energy minister of Indonesia, said factors beyond the cartel's control have added a $10-15/bbl premium to normal oil market prices. These included geopolitical tensions; unanticipated growth in demand for crude, particularly in China and the US; bottlenecks in refining and distribution among some consumer nations; and stringent government specifications of petroleum products.
"Combined, these factors have led to unwarranted fears about a possible future supply shortage of crude oil, which in turn have resulted in increased speculation in the futures markets with substantial upward pressure on prices," Purnomo said. He claimed OPEC is doing all it can to restore stability to world oil markets.
Energy prices
The October contract for benchmark US sweet, light crudes jumped by 52¢ to $44.39/bbl Tuesday on the New York Mercantile Exchange, with the November position advancing by 51¢ to $44.34/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 52¢ to $44.40/bbl.
Gasoline for October delivery shot up by 3.87¢ to $1.24/gal Tuesday on NYMEX. Heating oil for the same month climbed by 2.24¢ to $1.23/gal, with more private-sector meteorologists forecasting a colder-than-normal winter. Since heating oil stocks are not yet at a satisfactory level, prices are bound to rise, analysts said.
The October natural gas contract increased by 7.8¢ to $4.93/Mcf on NYMEX as Ivan impacted Gulf of Mexico production, marking the second consecutive session in which that contract has gained value, said analysts Wednesday at Enerfax Daily. "But traders are unsure to what extent the loss of output is already factored into prices," they said.
In London, the October contract for North Sea Brent crude gained 67¢ to $41.73/bbl on the International Petroleum Exchange. Gas oil for October delivery increased by $7.25 to $392.50/tonne. The October natural gas contract jumped by 11.2¢ to the equivalent of $5.29/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes was up by 77¢ to $39.07/bbl Tuesday.
Contact Sam Fletcher at [email protected]