Posted on 09/26/2005 11:56:49 AM PDT by Jomini
Oil prices steadied amid relief that key oil facilities in the southern United States had mostly escaped severe damage from Hurricane Rita over the weekend, dealers said.
Rita swirled through the Gulf of Mexico over the weekend, creating less havoc than expected, which led to an initial fall in oil prices and a positive reaction on global stock markets today. The US dollar also firmed against major rivals.
US President George W. Bush, meanwhile, sought to reassure Americans alarmed by sky-high gasoline prices that he was taking steps to limit the impact of Hurricanes Katrina and Rita on prices at the pump.
New York's main contract, light sweet crude for delivery in November, gained 16 cents to 64.35 usd per barrel in early trading.
In London, the price of Brent North Sea crude for November delivery increased 23 cents to 62.67 usd per barrel.
Oil markets on both sides of the Atlantic were open yesterday for an extended trading session to absorb the full impact of Rita over the weekend -- during which prices fell.
The retreat continued this morning, but later in the day, prices rebounded.
Barclays Capital analyst Kevin Norrish said: 'The initial market reaction (was) underestimating the cumulative impact of lost refinery production from Katrina and Rita in our view.'
'100 percent of US Gulf output is currently shut-in and the amount of lost production since Katrina now stands at 33.3 million barrels.'
The main area of concern for refineries was in Port Arthur in Texas.
Valero Energy Corp reported 'significant damage' to its 250,000 barrels per day (bpd) refinery which could take two weeks to a month to repair, Norrish said.
Meanwhile, French oil giant Total said it would take two weeks to a month to restart its 175,000 bpd refinery in the same city.
Anglo-Dutch energy giant Royal Dutch Shell reported wind damage at one of its Gulf Coast refineries after the passing of Rita. Shell said its 285,000 bpd Motiva Port Arthur refinery in Texas had been affected by wind damage.
The Shell Deer Park refinery and chemical plant near Houston, which has a capacity of 334,000 bpd, had 'minor damage'.
Anglo-Australian resources giant BHP Billiton said meanwhile that its Typhoon platform was severely damaged.
The offshore oil platform -- located 165 miles (265 kilometres) south of New Orleans, at a depth of around 2,000 feet (600 metres) -- has an output of 40,000 barrels of oil and 1.7 million cubic metres of gas per day.
British energy giant BP said, however, that its Gulf installations were largely unaffected.
Rita's path through the US Gulf inflicted far less damage than Hurricane Katrina, which tore through the region on August 29, pushing oil prices to historic highs and devastating the city of New Orleans.
Some 81 pct of 819 platforms and 69 pct of 134 rigs operating in the Gulf of Mexico were evacuated before the storm, which struck the US states of Texas and Louisiana on Saturday, the US Minerals Management Service (MMS) said.
The shutdown represents a loss of 1.5 mln barrels of crude a day.
About 80.5 pct of natural gas production in the area was also halted, according to the MMS.
The network of refineries off the coast of Texas represent some 25 pct of US refining capacity.
Whether insurgents or dollars, both inhabit target rich environments as a lot of ammo flying down range.
J
It's up $1.65 now
When they sniff "bad news" they raise the prices but when oil prices drop, they sure do take their sweet time getting around to lowering them again.
One of these gas companies is going to get smart and drop their prices to where they should be. They will have business out the ying-yang.
I would think Wal-Mart would realize the advantage to cutting the consumer some slack but we shall see.
Unless of course the markets are not really free -- which of course is what the Islamic entente is banking on with their nonlinear economic assault. Exporting inflation is clever for a while but eventually a debt-based society will be strangled by the ever increasing monetary supply. Best to let oil find its natural level even if it means the dollar gets hammered.
There is going to come a terrible day of economic reckoning in America. The price of crude a daily barometer that even Joe Six-Pack should be able to read despite the best efforts of the short sellers -- as unlike the gold market, oil one where physical delivery takes place all the time.
The Islamic entente a very clever and patient adversary. Ramadan 1426 coming soon to a theater near you!
J
its not a free market. once we all realize that, maybe we can actually adopt some policies to change the game. instead, we keep saying that "market forces" will fix everything.
Anyone ever wonder why there is not info on or pictures of the oil rigs right off the coast? Is someone hiding somthing?
There's a claim out there that falling prices are due to a drop in demand. I can't see it (except temporarily) so I expect prices to rise continually, but with big spikes in response to all events which threaten supply.
Seems like the market has digested the Saudi Sheikh's promise to increase production 2 million barrels. Net effect was supposed to be reduction to $40.
No, the information is available.
Mobile Offshore Rigs In Path of Hurricane Rita
Operators with Offshore Platforms in Projected Path of Hurricane Rita
Some one, some committee, some executive sets the price that gets sold to consumers.
I don't know who that guy(s) is, but the only free market way to set the price would be to have an auction of gas supplies.
I don't think they do it that way.
Eerily, the stations all seem to post the same price within a penny or two of each other. What a coincidence.
"The absolute worst move the president could make would be to release more oil from the strategic reserve."
Actually that is the BEST move he could make!
Oil is about $20 above where it should be ... the whole idea that crude oil should be higher because of a refinery shortage is absurd. It's like saying fertilizer should be higher because there are not enough wheat fields.
Bush did the right thing. He announced SPR would be released if needed ... as before we'll find few takers, because crude oil is a well-supplied market.
There is no shortage of oil at all, just market-based fears of potential shortages. Oil will be back to $45 within 2 months unless new fears are invented to keep it higher.
"There's a claim out there that falling prices are due to a drop in demand. I can't see it (except temporarily)"
China's demand in 2005 is below 2004 demand ... and that was in months prior to the current one, at lower prices.
Oil market continues to have plenty of supply.
"Seems like the market has digested the Saudi Sheikh's promise to increase production 2 million barrels. Net effect was supposed to be reduction to $40."
Glad to hear that oil bulls are oblivious to real market mechanisms. It won't take a day to see the change, but as demand sputters due to higher prices and supply increases as well, the rebalance point will be at a lower price.
Crude oil was already well-supplied was the point of OPEC. the reason for the high price is market fear; once the market runs out of fears, it will be left to trade back on real supply/demand ... much lower. They now have no limits on production, but are there buyers for their product? While spot-market oil trades in the $60s, most contract oil is selling for less, in the $50-55 range.
This is about OPEC gettng the price down to $45 or so *before* the high prices impact demand so much that the bottom ends up being far far lower if/when a global recession hits.
OPEC knows the hangover that happened in the 1980s after the oil boom and they dont want to revisit either.
Note the price differential on WTI and the other crudes:
http://www.oilnergy.com/1cashpet.htm#allcrude
Note the plans for more oil discovery in the mideast ...
http://www.strategiy.com/oilenergyinews.asp?id=20050821133435
"More than US$ 90 billion will be invested in the Arabian Gulf’s oil and gas infrastructure over the next five years "
If that's correct then prices will fall but it's not what I've been reading. Why would China's demand be falling?
"Some one, some committee, some executive sets the price that gets sold to consumers. "
That 'committee' is called NYMEX. :-)
"I don't know who that guy(s) is, but the only free market way to set the price would be to have an auction of gas supplies.
I don't think they do it that way. "
Yes, they do ...
http://www.oilnergy.com/1cashpet.htm#allcrude
"Eerily, the stations all seem to post the same price within a penny or two of each other. What a coincidence."
Because gas station buyers will always pay the market price for the commodity, then charge a markup. Eerily, this the market price doesnt change for gasoline between two gas stations down the road from eachother.
"Why would China's demand be falling?"
Gee, maybe it's the near-doubling in price in 12 months...
Overall Chinese oil demand is still up, but that is misleading since many Chinese refineries are re-exporting. End-user demand has fallen YoY in both fuel oil and gasoline.
http://omrpublic.iea.org/
"Projected 2005 global demand growth is revised down by 250 kb/d, to 1.35 mb/d. OECD demand was below expectations in July and Chinese apparent demand remains weak. This change is only partly attributable to Katrina, as regional demand is expected to recover fairly quickly."
http://www.stuff.co.nz/stuff/0,2106,3424060a6026,00.html
"China's apparent oil demand climbed 3.7 per cent in August from a year earlier, expanding faster than in July but trimmed by fuel shortages in the south that limited consumption.
Net imports of refined products into the world's second-largest oil consumer slipped after a rise in retail prices and a revaluation of the yuan failed to tempt sellers into its price-capped market.
Crude oil imports fell 6 per cent to their lowest since January, as refiners shunned pricey global markets and helped by a 3.2 per cent rise in domestic output. "
...
"August imports of fuel oil - used for power generation, in factories and as feedstock for small refiners - fell 10.3 per cent to 1.96 million tonnes.
Retail prices for fuel oil, China's largest product import category, are not government controlled and so soaring international prices have hit demand severely.
"Although underlying pent-up demand suggests that fourth-quarter consumption could rebound, the prospects for a recovery in fuel oil demand appear increasingly remote," the International Energy Agency said.
"Quite simply, high fuel oil prices have induced fuel switching where possible and hydropower generation has increased." "
The only data I have seen is comparing first quarter.
EIA, World Oil Demand, 2001-2005
This shows an 8% increase in 2005 over 2004. What data have you see?
To clarify, the drop in imports reported was a sequential monthly drop, not a year-over-year drop ...
http://www.businessweek.com/ap/financialnews/D8CRURRO0.htm?campaign_id=apn_home_up&chan=db
"Elsewhere, China said its oil imports grew 3.9 percent in August from a year ago, with the mainland bringing in 91.49 U.S. tons of crude for the year. Still, imports fell 6 percent to 9.59 U.S. tons from the previous month -- a possible indication of falling demand in the second-biggest oil consuming nation after the United States."
So down sequentially by 6% ...
Still, if the YoY import increases are only 4%, then the bullish case for 'insatiable' demand that is not changed by high prices is about to get busted. China is now a 6 million barrel a day country. 4% YoY is a mere 240,000 extra barrels. It completely rewrites the long-term case for oil demand if $65/barrel oil make demand increases dry up. If other poor countries are reacting the same, then
demand forecasts will get cut again.
Oil will be $45/barrel or below soon. Case closed.
See previous reply.
http://www.businessweek.com/ap/financialnews/D8CRURRO0.htm?campaign_id=apn_home_up&chan=db
"Elsewhere, China said its oil imports grew 3.9 percent in August from a year ago, with the mainland bringing in 91.49 U.S. tons of crude for the year. Still, imports fell 6 percent to 9.59 U.S. tons from the previous month -- a possible indication of falling demand in the second-biggest oil consuming nation after the United States."
EIA will likey cut the oil forecast for China in response to this.
not unless the speculators are taken out. to do that, some external event in the market must shock the price down - forcing them out of their positions.
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