US Sees Storm-Induced Production Cuts At A 5-Year Low; No Price Flare Up Seen
CRUDE OIL prices, which hit their highest level since October on Tuesday, are unlikely to rise much further in the coming months or find support from damaging storms during the June-November Atlantic hurricane season.
The US Energy Information Administration (EIA) has estimated hurricane-induced production outages at a 5-year low of 4.5 million barrels of oil and 36 billion cubic feet (bcf) of natural gas for 2009. The US Gulf coast, where the storms occur, account for a quarter of the country’s output. The estimates are based on the hurricane outlook of National Oceanic and Atmospheric Administration (NOAA) and are subject to change.
Crude oil prices crossed $70 per barrel on the New York Mercantile Exchange on Tuesday, ahead of the US inventory data. Expectations of a fall in the US crude oil inventories, a weak dollar and hopes of economic recovery have helped crude oil prices regain their October levels.
“The markets have run a bit ahead of themselves,” observed Vicky Sajnani, an associate with JM Financial.
“There has been no major positive event for the rally in crude oil prices and most of the minor positives such as the recovery in Chinese auto sales, the so-called ‘green shoots’ of recovery in the US economy or even the possible production disruption in the hurricane season appear fully discounted”, he added.
He expects crude oil prices to linger around $70-75 per barrel in the near future.
In 2005, hurricanes Katrina and Rita destroyed 113 offshore platforms and damaged another 52. The cumulative production losses due to these hurricanes was estimated at 166 million barrels of crude oil and 804 billion cubic feet (bcf) of natural gas — over a quarter of the region’s annual output. Katrina and Rita pushed global crude oil prices nearly 40% higher within just three months.
In September 2008, hurricanes Gustav and Ike hit the region within a few days of each other, halting output for several days and resulting in a production loss of 60 million barrels of oil and 335 bcf of natural gas. Pravin Singh, a research analyst at Sharekhan Commodities, is of the view that crude prices could move up to $76 per barrel on the back of dollar weakness and falling US inventories before it sees a correction of 20-30%.
“Although there are several indicators of economic recovery, the fundamentals appear little changed,” he said.
EIA expects petroleum consumption in the US to drop by 2.9% or 550,000 barrels per day (bpd) in 2009 due to the weak economy. But the consumption of gasoline could go up “as a result of the substantial declines in retail prices from last summer and stabilisation of real disposable income.”
CRUDE OIL prices, which hit their highest level since October on Tuesday, are unlikely to rise much further in the coming months or find support from damaging storms during the June-November Atlantic hurricane season.
The US Energy Information Administration (EIA) has estimated hurricane-induced production outages at a 5-year low of 4.5 million barrels of oil and 36 billion cubic feet (bcf) of natural gas for 2009. The US Gulf coast, where the storms occur, account for a quarter of the country’s output. The estimates are based on the hurricane outlook of National Oceanic and Atmospheric Administration (NOAA) and are subject to change.
Crude oil prices crossed $70 per barrel on the New York Mercantile Exchange on Tuesday, ahead of the US inventory data. Expectations of a fall in the US crude oil inventories, a weak dollar and hopes of economic recovery have helped crude oil prices regain their October levels.
“The markets have run a bit ahead of themselves,” observed Vicky Sajnani, an associate with JM Financial.
“There has been no major positive event for the rally in crude oil prices and most of the minor positives such as the recovery in Chinese auto sales, the so-called ‘green shoots’ of recovery in the US economy or even the possible production disruption in the hurricane season appear fully discounted”, he added.
He expects crude oil prices to linger around $70-75 per barrel in the near future.
In 2005, hurricanes Katrina and Rita destroyed 113 offshore platforms and damaged another 52. The cumulative production losses due to these hurricanes was estimated at 166 million barrels of crude oil and 804 billion cubic feet (bcf) of natural gas — over a quarter of the region’s annual output. Katrina and Rita pushed global crude oil prices nearly 40% higher within just three months.
In September 2008, hurricanes Gustav and Ike hit the region within a few days of each other, halting output for several days and resulting in a production loss of 60 million barrels of oil and 335 bcf of natural gas. Pravin Singh, a research analyst at Sharekhan Commodities, is of the view that crude prices could move up to $76 per barrel on the back of dollar weakness and falling US inventories before it sees a correction of 20-30%.
“Although there are several indicators of economic recovery, the fundamentals appear little changed,” he said.
EIA expects petroleum consumption in the US to drop by 2.9% or 550,000 barrels per day (bpd) in 2009 due to the weak economy. But the consumption of gasoline could go up “as a result of the substantial declines in retail prices from last summer and stabilisation of real disposable income.”
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