Energy Prices Up on Storm Concerns
Energy prices zoomed anew Wednesday, led by natural gas, amid concern more hurricanes might develop in an Atlantic season that has already sharply curbed production in the Gulf of Mexico.
Also, a strike by energy workers in France threatened to worsen U.S. gasoline woes.
Near-term natural gas futures in New York soared $1.25, or nearly 10%, to a record $13.91 per million British thermal units. The price has rocketed 42% since just before Hurricane Katrina struck at the end of August.
Crude oil futures rose $1.28 to $66.35 a barrel and unleaded gasoline futures surged 17.3 cents, or 8%, to $2.34 a gallon.
Oil’s record high was $69.81 on Aug. 30; gasoline futures hit a record $2.61 on Aug. 31.
The National Hurricane Center reported that a vigorous tropical storm system was developing in the Caribbean Sea.
“As soon as they see a storm rearing its ugly head again,” traders start buying, said Brad Florer, a broker with ICAP Energy in Louisville, Ky.
Gulf of Mexico rig shutdowns have reduced natural gas output to 20% of the region’s normal total, the U.S. Minerals Management Service said. The gulf accounts for about a quarter of total U.S. gas output.
“It’s kind of a critical time to get one last push on inventories before the heating season,” said Chris Ovrebo, a broker with FC Stone in Eden Prairie, Minn.
The Natural Gas Supply Assn. struck an optimistic tone in a report Wednesday. The group said increased imports from Canada and other producers would mitigate some of the hurricane damage, sending U.S. gas inventories above normal levels by the time the heating season starts in November.
Even so, “consumers should be prepared to pay higher [heating] bills this winter,” association Chairman Joseph Blount told reporters in Washington.
U.S. natural gas inventories as of Sept. 16 totaled 2.83 trillion cubic feet, 3.4% above the five-year average for that date, the Energy Department said.
In its weekly report Wednesday on oil and gasoline inventories, the government said crude supplies fell a bigger-than-expected 2.4 million barrels last week, to 306 million as Hurricane Rita curtailed the offloading of imports.
Gasoline inventories rose 4.4 million barrels for the week to nearly 200 million. But traders nonetheless drove gasoline futures higher on worries that refinery production will continue to be limited for months because of hurricane-related shutdowns. Eleven refineries in Louisiana and Texas are closed because of the hurricanes.
“There’s still major concern about refining capacity and the ability of these refiners to get those refineries up and running,” said Ed Silliere, an energy futures trader for Energy Merchant Brokerage Inc.
In France, a leading U.S. gasoline supplier, shipping workers Wednesday extended their strike by 24 hours, blocking access to the Lavera-Fos oil-refining hub for a second day. Workers are protesting the planned privatization of a ferry company. If the strike drags on, French refiners will run out of crude oil to process.
