MARKET WATCHCrude oil prices drop as Hurricane Ivan appears headed towards Florida
By OGJ editors
HOUSTON, Sept. 13 -- Energy futures prices have been up and down pending the approach of Hurricane Ivan, and prices dropped Friday on the New York Mercantile Exchange because weather forecasters believe the storm probably will miss the bulk of oil and natural gas production in the Gulf of Mexico.
Prices had spiraled on Thursday, but traders said that was triggered by a "knee jerk reaction" among some speculators who bid up prices. Friday's lower closing prices reflected "a return to sanity," one analyst said.
Shell Oil Co. said Monday that it was evacuating 750 personnel from its eastern gulf operations. Production in this area was being shut in, and that process started Sunday.
Production facilities in the affected area include Mars, Ram Powell, Ursa, West Delta 143, Cognac, and Main Pass 252. Shell-operated total gross production for these facilities is 272,000 b/d of oil and 880 MMcfd of gas.
Preparations were under way to evacuate the central gulf locations by Wednesday. While production continued in the Central Gulf of Mexico locations, drilling operations were suspended in these areas, Shell said.
Hurricane Ivan struck the Cayman Islands Sunday, swamping homes with floodwaters and ripping off roofs with fierce winds. It was headed toward western Cuba Monday.
The hurricane killed at least 65 people across the Caribbean before reaching the Caymans, where the storm's eye passed just south of Grand Cayman.
Ivan was expected to move into the gulf Tuesday, threatening to make landfall in the Florida panhandle, Mississippi, or Louisiana. As of Monday morning, the National Hurricane Center in Miami said Ivan was a Category 5 storm with sustained winds of 160 mph.
Energy prices
The October contract for benchmark US sweet, light crudes dropped by $1.80 to $42.81/bbl Friday on NYMEX, while the November position lost $1.79 to $42.84/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.80 to $42.82/bbl.
Prices for refined product also closed lower. Gasoline for October delivery plummeted by 6.12¢ to $1.16/gal, and heating oil for the same month lost 6.38¢ to $1.16/gal.
The October natural gas contract lost 8.8¢ to $4.57/Mcf on NYMEX. Enerfax Daily analysts noted that this was "a 10-month low." This was based upon forecasts that indicated Ivan probably would not disrupt the heart of gulf production, they said.
In London, the October contract for North Sea Brent crude declined by $2.20 to $40.20/bbl on the International Petroleum Exchange. Gas oil for September delivery was unchanged from Thursday at $394.25/tonne. The October natural gas contract rose by 7¢ to the equivalent of $4.99/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries's basket of seven benchmark crudes edged upward by 8¢ to $38.82/bbl Friday. The OPEC Secretariat said the basket price has averaged $34.23 for the year as of Sept. 9. The basket price averaged $28.10/bbl in 2003 and $24.36/bbl in 2002.