Posted on 09/02/2005 10:53:05 PM PDT by humint
According to the Minerals Management Service (MMS), as of 11:30 Central Time September 2, Gulf of Mexico oil production was reduced by over 1.328 million barrels per day as a result of Hurricane Katrina, equivalent to 88.53 percent of daily Gulf of Mexico oil production (which is 1.5 million barrels per day). The MMS also reported that 7.248 billion cubic feet per day of natural gas production was shut in, equivalent to 72.48 percent of daily Gulf of Mexico natural gas production (which is 10 billion cubic feet per day).
On Friday, September 2, the International Energy Agency (IEA) directed its member nations to make an extra 2 million barrels of oil per day available to the market for the next 30 days, with half of this contribution to come from United States' Strategic Petroleum Reserve (SPR). A large portion of the oil from outside of the United States will be released in the form of refined products. The United States will put up 30 million barrels of crude oil for sale from its Strategic Petroleum Reserve, with the proviso that the bids meet minimum acceptable levels. This oil is in addition to the 9.1 million barrels of oil that will be loaned out from the SPR to ExxonMobil, Valero, Placid, and ATI, with negotiations underway for additional loans as announced by the Secretary of Energy on September 1.
Petroleum
Crude oil prices and petroleum product futures and spot prices have dropped dramatically on Friday, September 2, due to news about the release of strategic inventories from the International Energy Agency and news about improvements in petroleum infrastructure, particularly for the Plantation and Colonial pipelines. As of the close of trading on Friday, the gasoline near-month futures price plummeted by 22.5 cents per gallon from yesterday, settling at 218.4 cents per gallon, while the heating oil near-month futures price declined 10.7 cents per gallon, settling at 209.11 cents per gallon. The NYMEX West Texas Intermediate (WTI) crude oil futures price dropped $1.90 per barrel from yesterday, settling at $67.57.
As of August 26, (the most recent data available), U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.5 million barrels from the previous week. At 321.4 million barrels, U.S. crude oil inventories are well above the upper end of the average range for this time of year. Total motor gasoline inventories declined by 0.5 million barrels last week, putting them near the bottom end of the average range. Distillate fuel inventories increased by 2.7 million barrels last week, and are above the upper end of the average range for this time of year. Total commercial petroleum inventories rose by 2.4 million barrels last week and now stand above the upper end of the average range for this time of year. Total product supplied over the last 4-week period has averaged 21.5 million barrels per day, or 2.3 percent more than averaged over the same period last year.
Electrical power has been restored to some of the refineries that were affected by Hurricane Katrina, and some other refineries are expected to have power restored within the next 7-10 days. This should allow some refineries to begin start producing again in the near future, but other refineries that were damaged more extensively from the hurricane may be down for some time to come. Several factors that may affect refinery production are highlighted in EIA's This Week in Petroleum.
The U.S. distillate surplus that built up over the last several months will certainly be important as seasonal emphasis shifts to heating oil. While distillate prices will react to crude price and related developments, the more critical near-term product problem relates to gasoline.
There continue to be reports in the media of gas stations in various parts of the country that are out of gas. While EIA does not monitor supplies at individual stations or localities, there are some reasons why this may be occurring at selected stations. With about 2 million barrels per day of crude oil refining capacity shut in or reduced due to Hurricane Katrina, approximately 1 million barrels per day (42 million gallons per day) of gasoline is not being produced. This represents about 10 percent of the nation's consumption, and is a major drop in the normal flow of gasoline through the system. In addition, major pipelines originating in the Gulf of Mexico area (namely the Plantation and Colonial product pipelines and the Capline crude oil pipeline) were initially shut down but have since been restarted, although at reduced volumes. As a result, the distribution of gasoline, particularly in the Gulf Coast, Midwest, and East Coast regions of the country, has now been significantly affected. Localities that were being served from gasoline terminals which already had low inventory levels, perhaps because they were expecting a delivery in the near future, could run out of supply before the next delivery arrives. Other areas that did have plenty of inventories on hand prior to the loss of the refineries and pipelines will be able to withstand the loss of supply for a longer time. However, it is impossible for EIA to know which terminals were well supplied and which ones were not prior to Hurricane Katrina, since EIA does not collect inventory data for individual terminals. But as soon as the affected service stations are able to receive additional gasoline, they should be able to re-open
Ports and Pipelines
On Friday, September 2, the Louisiana Offshore Oil Port (LOOP) was operating again, although at less than full capacity. A pipeline controlled by the port meets the Capline pipeline system in St. James, Louisiana, which connects to refineries. More than 10 percent of the nation's imported crude oil typically enters at the LOOP.
As of September 1, Capline (a major crude oil pipeline that runs from the Gulf Coast to Midwest refineries) had returned to service, with flows at 70 percent of capacity. Two major product pipelines from the Gulf Coast to the East Coast, Plantation and Colonial, dramatically improved their flow rates as of September 2, with Plantation running at 95 percent of capacity and Colonial pipeline at 66 percent of capacity. Colonial pipeline was expected to be above 80 percent capacity by sometime this coming weekend.
Natural Gas
As of the close of trading on Friday, September 2, the natural gas futures price for October delivery was down nearly 7 cents, to reach $11.69 per million Btu. In trading on the Intercontinental Exchange, the Henry Hub spot price was $11.75 per MMBtu, up $0.386 from yesterday (Thursday) and about $1.88 per MMBtu from last Friday's price (before the storm). At market locations across the Gulf region, price decreases today ranged up to $0.44 per MMBtu with an average of $0.27 per MMBtu. The overall average change in price was $0.14 per MMBtu.
There are reports that Hurricane Katrina may have damaged four natural gas processing facilities on the Gulf Coast with a combined capacity of 5.5 Bcf per day, which is the equivalent of almost 10 percent of total national production. Follow-up reports have not indicated expected outages of more than a few weeks, with many units expected on line within a few days. A full assessment of some facilities, however, will require onsite inspections. If these or other plants are inoperable for any length of time, the loss could delay a recovery of natural gas production in the area. Even if platforms and pipelines are either unaffected or readily restored to service, the gas often can't flow to market without treatment. In 2003 (the latest year with complete data), almost three-fourths of total U.S. marketed gas production was processed prior to delivery to market.
Let's hope Steve Forbes will be right!
Posted this on another thread:
Just got home from a wedding. The warnings about gas this weekend are either 1) true or 2) giving station owners carte blache to gouge.
Example: as of 12:45am EST, a major gas station in Kingsbridge, Bronx had caution tape over the pumps with signs saying "out of regular and plus" Of course you could get premium for $3.89.
I'd like someone to subpoena these "premium only" gas stations and check out their Veeder Root records (tank levels)
Dude, we're on Daylight Time now, not Savings Time. EDT, not EST.
At an international conference this week, billionaire Steve Forbes — who has some financial expertise — said oil prices would drop to between $35 and $40 a barrel within a year’s time. Mr. Forbes said it may sound "like a bold prediction" but he told the audience "the bubble has to burst some time." He based his prediction on a rational analysis of market forces, supply and demand, and other factors involved in calculating prices of natural resources. Some public officials, though, are not into rationality. Nine Democratic members of the House Judiciary Committee wrote the Federal Trade Commission this week demanding an investigation into high gas prices. "These increases go far beyond anything justified by disruptions caused by Hurricane Katrina," wrote Rep. John Conyers of Michigan...
oops, you're absolutely right. I had a few VO gingers at a wedding tonight;)
I guess one would have to be drunk to get married! Congratulations!
wasn't me! A cousin of mine... but thanks anyway!
Missed that post. but it's so good, it's worth reading twice.
;)
Dude, hit Google and look up what the "S" in EST really stands for. It isn't "Savings".
Every time the price of some commodity goes up there are always uninformed jackasses who try to demagogue the situation by insisting that it's the result of greedy people gouging prices. You can bank on it.
It's always easier to attribute events we don't understand to behavior we do. Profit margins at the pump are so low, we can't blame station owners. Oil companies aren't withholding the commodity so we can't blame them. Exporting countries with reserves are experiencing particularly high instability... probably the main culprit. Our administration has root caused the problem and is introducing long term stability in the form of democracy to regions with the most reserves. We're in for a bumpy ride but we all need to agree on the goal. A stable and democratic Middle East allied to American values.
To your point… People become jack asses when they're willing to make up answers to their own questions or assume someone else has responsibility and the answers. In either case, a jack ass is content with his or her misery and decides not to seek answers or solutions. Greed is a problem, but certainly not the whole problem.
Great post!!! Thanks.
Second, there are 130 MM bbls, no typo, of non-spec unleaded from Europe that will be in the distribution channels by (probably) late next week. That's 13 days' supply for the entire, say again entire, nation, on top of what's being produced right this minute.
Plain English, bottom line: we're going to be absolutely awash in gasoline in 2 weeks or less.
The long specs had best get the hell out of Dodge, m'friend. High prices always are the cure for high prices, and this little cure is going to bankrupt some specs.
You heard it here first, and if developments prove me wrong (say, another hurricane might do so), then rag my sorry a$$. Equally, when this little artificial spike subsides handily, I'll accept your (presumably) gracious comments about an accurate mkt call.
BTW, NO...I'm not short the HU mkt -- it will drop sharply, shortly, but there's nothing to say that it won't pop 20-30 cents upward before doing so. There's no statistical advantage for a new entrant into this mkt at this time.
It's not here yet, not by any measure, and certainly not in the US, where stocks on hand are in at least as good shape as they've been since 2001-2002. However, one doesn't buy A barrel of crude at the mkt price; one buys the next barrel of crude, the famed ''marginal'' barrel.
The price of this famous barrel is being gunned not by speculation, not by governments, but by plain old-fashioned fear of what ''might'' occur. Not w/o reason, mind you. Civil war in Nigeria? Might well occur next week. Shipping embargo by the socialist moron Chavez? Distinct possibility (won't work out the way he wants it to, but he's too stupid to understand why not). Iran announces possession of a ''dirty'' bomb or two (they're some little time away from building a real nuke)? Absolutely likely, the more so as instability increases in the ''Islamic Republic''.
Easy to name a couple of dozen such possibilities, and it's terribly easy to spot what the mkt participants in energy do in response to the possibilities. True pros in energy aren't there to gamble (unlike, say, most major airlines), they're there to run their respective businesses and make a buck. In plain English, they hedge out their risk when and where possible.
If one HAS TO have the goods in hand or otherwise be able to purchase them, and there is ANY sort of risk that one might not be able to do so at some unnamed but nearby future date, the only sensible course is to purchase in front of usage, WELL in front.
And that is what is occurring now. Additionally, the oil majors are NOT hedging (that's a sell hedge, btw) to the degree they've done historically. Just check the COT reports about NYMEX energy mkts that come out every Friday, and compare them to prior years' reports.
''Greed'', as you put it, is a small part of the current mix, but Big Daddy is named ''fear''.
Thanks!
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