Houston refinery explosion, tropical storm push IPE Brent higher

London (Platts)--17Oct2005

Brent crude futures on London's International Petroleum Exchange surged
higher after weekend reports of an explosion at Citgo's 268,000 b/d refinery
in Houston and with tropical storm Wilma gaining strength in the Caribbean,
traders said. 

     By 1005 London time, the new front-month December Brent futures contract
had surged by over $1.40/bbl above Friday's settlement to trade at $61.68/bbl,
having been as high as $61.75/bbl earlier in the day. 

     Brokers remained unconvinced that the rally would be maintained, citing
weaker than expected demand figures from last week's US Department of Energy
and American Petroleum Institute stock reports. 

     "The demand figures were not great and its going to be a question of wait
and see if this market will recover," one broker said. Over the past week,
several brokers have said prices will depend on how severe the winter is and
this has yet to be determined. 

     Friday's Commitment of Traders report appeared to reinforce this view
with the hedge funds or non-commercials said to be balanced on their
outstanding positions. 

     On a futures and options basis, the non-commercials were net long heating
oil just 5,265 contracts, in gasoline they were long over 19,000 contracts and
remained long in crude oil by over 28,000 contracts, the COT report said. 

     Interestingly, on a futures only basis. the non-commercials were short by
over 27,500 contracts. Typically a short position will leave the market prone
to sudden price spikes as traders enter into the market to cover any short
positions that they hold. Where a long position is held, the reverse is
typically true and prices remain prone to sudden sell off's. 

     At 0900 GMT, tropical storm Wilma gathered strength and had been upgraded
to a tropical storm and was lying about 175 miles southeast of Grand Cayman
with sustained winds of about 40mph. 

    Tropical storm Wilma is the 21st named storm of the 2005 Atlantic season,
equaling a record for the number of storms set in 1933, according to the
National Hurricane Center.

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