Crude futures down as Tropical Storm Chris relents

Crude futures down as Tropical Storm Chris relents

London (Platts)--3Aug2006

Global crude prices were down slightly Thursday as the threat of tropical
storm Chris developing into a hurricane appeared to be diminishing as the US
National Hurricane Center in its latest bulletin noted that Chris was
"becoming disorganized".
In its latest bulletin issued at 0200 AST (0600 GMT), the NHC said that
maximum sustained wind speeds had dropped to 55 miles/hour (90 km/hour), from
the 60 miles/hour in a previous bulletin issued only three hours earlier.
At 1036 London time, September IPE Brent futures in London were trading
at $76.64/barrel down 25 cents. While in NYMEX Access trading, the September
WTI futures contract was changing hands at $75.36/barrel down 45 cents.
"A lot of the market were spooked yesterday by the forecast of the
tropical storm turning into a hurricane and there was a lot of short
covering," a London-based broker said. "However with the risk of it turning
out to be anything major reducing people are just calming down today."
The NHC said that the center of the storm was moving away from
thunderstorm activity and if this pattern continued, "gradual weakening is
anticipated".
On its current trajectory, Chris has so far skirted the vital oil and gas
producing areas of the Gulf of Mexico and the numerous refineries dotting the
coast. Production and refining facilities in the Gulf area suffered a
devastating blow from hurricanes Katrina and Rita in the 2005 Atlantic
hurricane season.

IPE BRENT-NYMEX WTI SPREAD WIDENS

September IPE Brent continues to trade at a premium to the equivalent
NYMEX WTI contract and the spread has widened to over $1.28/barrel.
Disregarding periods immediately around expiry dates of the front-month
contracts of IPE Brent and NYMEX WTI, where market players roll their
positions from one month to the next and skew the futures price, the current
spread level between WTI and Brent has not been seen since April 2005.
One reason for the current spread is that unplanned maintenance in the
North Sea has reduced loading programs. Production in August for the six main
North Sea grades of Brent, Forties, Oseberg, Ekofisk, Statfjord and Gullfaks
is scheduled to decline by 301,500 b/d to 1.802 million b/d.
"I think a lot of people got caught out when unplanned maintenance was
announced in the North Sea. This will obviously reducing upcoming Brent
loading programs," a trader said.
Also, tighter supply from Nigeria have kept Brent futures supported as
well as a reduced risk of WTI production disruption from Tropical Storm Chris
has pushed WTI futures down further today.

US CRUDE STOCK DATA
On Wednesday crude futures also rose on the back of bullish US stock data
as well as the threat of disruption in the US Gulf Coast due to Tropical Storm
Chris.
The Energy Information Administration reported a 1.8-million barrel draw
in US commercial crude stocks whilst the American Petroleum Institute showed a
6.6-million barrel draw.
"The balance of risks for oil prices continues to tilt toward the
upside," Paul Horsnell and Kevin Norrish, analysts at Barclays Capital, said
in a weekly report.

MIDDLE EAST CONFLICT
In the Middle East, nearly 10,000 Israeli ground troops were battling
Hezbollah fighters on Thursday around some dozen villages in south Lebanon,
army radio reported. An army spokesman told AFP the troops were deployed "in
about a dozen villages where Hezbollah fighters are operating."
Syria, who is accused, along with Iran, by the West of financing and
arming Hezbollah, has promised to use all of its influence on Hezbollah in a
bid to bring an end to the fighting in Lebanon, Spanish Foreign Minister
Miguel Angel Moratinos said Thursday.
"The Syrian authorities are going to exercise all their influence over
Hezbollah and over the various actors" in the conflict, Moratinos said after
meeting with President Bashar al-Assad and other senior officials.
Market players are not viewing the current conflict as particularly
supportive for crude prices at the moment.
"It's all been priced in and if it carries on like it is then I don't
think it will add much. However if there was a resolution I can definitely see
a drop in prices quite quickly," a London-based broker said.
--Jean-Luc Amos jean-luc_amos@platts.com

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