IPE Brent rebounds as the IEA forecasts steep product losses

London (Platts)--11Oct2005

Brent crude futures rebounded Tuesday after the release of the bullish
International Energy Agency monthly report, showing that the combined impact
of Hurricanes Katrina and Rita would be felt on the world oil markets for
several months to come. 
     "If you are short its very worrying," one broker said referring to the
latest report. Front-month November Brent was trading up 68 cts from Monday's
settlement at $59.44/bbl, towards the upper end of the trading range. 
     "The people that thought this market would go to $50/bbl are being proved
wrong," one broker said. Prices had dropped to as low as $57.43/bbl Monday,
but since then have rebounded by over $1.50/bbl. 
     The IEA said as much as 163-mil bbl of refined product output had been
lost due to the storms. "The prolonged outage of a significant amount of US
refining capacity came on top of an already tight situation in terms of
capacity," the IEA said. 
     Brokers said that the severity of the winter would test the supply side.
"If we get a harsh winter, an we predict it will, prices are going to surge
higher," one broker said.. 
     
     PRODUCT STOCKS TO DECLINE 
     The loss of US refining capacity will lead to an inevitable decline in
gasoline and distillate stocks and this coupled with the absence of a normal
seasonal build in heating oil inventories is of "particular concern," the IEA
noted. 
     The tighter product supply situation could well extend into 2006 as the
postponement of some Autumn refinery maintenance will inevitably lead to a
heavier maintenance schedule in 2006. 
     The IEA also made large cuts to its forecasts for non-OPEC crude supply
for 2005 and 2006. In the fourth quarter, supply is expected to be 900,000 b/d
less than previously predicted at 50.7-mil bbl.
     Brent crude futures have tumbled over $9.50 since hitting an all-time
high level of $68.89/bbl on August 30, a decline of over 16% largely on fears
of a destruction in demand outweighing supply shortfalls in the US Gulf coast
due to two recent hurricanes. 
     Gasoil futures have also tumbled sharply falling by over $60/mt since
early September to just over $600/mt. 
--Paul Wightman, paul_wightman@platts.com

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