IPE Brent futures supported by Tropical Storm Chris, US data

IPE Brent futures supported by Tropical Storm Chris, US data

London (Platts)--2Aug2006

IPE Brent futures in London ranged higher on Wednesday following reports
that Tropical Storm Chris could become a hurricane later on today, brokers
said.
The market is monitoring the trajectory of the storm and whether it is
likely to hit the oil and gas producing areas of the Gulf of Mexico. Also
providing support to the market is an expectation of a draw in crude and
gasoline stocks when the Department of Energy releases it's US inventory
figures later Wednesday.
At 1031 GMT, September Brent was trading 38 cents higher at $76.27/barrel
hitting an inter-day high of $76.50/barrel. Forward month Brent closed Tuesday
trading at a 93 cents premium to September WTI with an inter-day high of 125
cents.
Brent trading above WTI other than the days leading up to contract expiry
is rare. It has only traded at a premium exceeding a dollar on three other
occasions, discounting days leading up the expiry of the forward month
contract.
Tightness of supply in the North Sea is the main reason that Brent is so
high. The North Sea programs have been reduced, particularly Forties, with the
production and loading of barrels per day at a low ebb due to extended
maintenance on production facilities.
This has also pushed Brent firmly into backwardation with September
trading 21 cents higher than October at 1130 London time, with the November
contract trading just 5 cents higher. Also, the presence of large stocks of
crude in the US is contributing to relative weakness of WTI, although a large
draw in crude stocks today could re-address the balance, a broker said.

HURRICANE RISK
On Wednesday the NHC advisory said maximum sustained winds were
continuing near 60 miles/hour, or 95 kilometer/hour with higher gusts. "Some
strengthening is forecast during the next 24 hours and chris could become a
hurricane later today or early Thursday," the NHC said.
On its current trajectory, Chris is so far skirting 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.

US INVENTORY DATA
US oil inventory data due to be released Wednesday by the US Energy
Information Administration and American Petroleum Institute are expected to
show a 990,000 barrel draw in commercial crude stocks, analysts surveyed by
Platts said Tuesday.
"Crude stocks should indicate a moderate decrease due to an expected drop
in imports back to below the 10.5 million b/d level and an anticipated
recovery in refinery runs," energy consultant Jim Ritterbusch said in a
report. "Declines may have also been driven by an expected reduction in West
Coast stocks."
Refinery utilization was expected to climb by 0.7% to reach 93.2%, based
on EIA data.
"Refinery runs will likely post a significant increase due to an expected
rebound in Gulf Coast activity and a further recovery in East Coast runs,"
Ritterbusch added.
Analysts were projecting a decline in gasoline inventories of 1.4 million
barrels.
"The key to Wednesday's numbers is the extent to which refinery problems
sapped gasoline production," Deborah White, energy analyst at Societe
Generale, said in a report. Consensus estimates were projecting a build of 1
million barrels in distillate inventories, in line with the normal seasonal
pattern.
--Jonathan Davies, jonathan_davies@platts.com

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