ICE futures climb on BP, Shell supply concerns

ICE futures climb on BP, Shell supply concerns

London (Platts)--19Sep2006

Crude oil futures in London held onto the strong overnight gains as
traders re-focused on a shortage of crude oil supplies heading forward
following reports of BP and Shell suffering setbacks in their upstream
production projects, brokers said Tuesday.
The front-month November Brent futures contract was trading 6 cents
higher from the overnight settlement at $64.11/barrel building on Monday's
strong gains of around 70 cents. The rebound marks the end of 16 straight
trading days of declines.
The market is extremely nervous about crude supply despite the high stock
levels following these major announcements," one broker at Man Financial said.
However, the longer term Brent futures contract was likely to see the biggest
price moves upwards, one broker noted.
The spread between December 2007 and December 2008 futures was trading
higher in early trading at around 77 cents in backwardation having been closer
to 20 cents a few days ago, brokers noted.

SUPPLY WORRIES FOR BP/SHELL
BP said Monday production from its huge Thunder Horse development in the
deepwater Gulf of Mexico will not begin until at least mid-2008 because the
company needs to rebuild all of the platform's seabed production equipment.
BP has pegged the 1 billion-barrel Thunder House field as the cornerstone
of its development program in the deepwater Gulf. The platform is expected to
handle 250,000 b/d of oil and 200,000 Mcf/d of gas.
Elsewhere, the Russian authorities canceled a key environmental permit
for the $20 billion Sakhalin-2 energy project in eastern Russia. The European
Commission has weighed into the debate expressing concern over the decision by
Russia.
European energy commissioner Andris Piebalgs said he planned to write to
Russian energy minister Viktor Khristenko to seek a speedy resolution of the
dispute over the multi-billion dollar project.

HEDGE FUNDS LOSE
Amaranth Advisers, a hedge fund with $7.5 billion under management, has
told investors that its main funds are down 35% or more this year in the wake
of collapsing natural gas prices, the FT has reported. NYMEX natural gas
futures have tumbled nearly 60% since the beginning of August with the
front-month October contract at $5.12/mmbtu.
The huge losses at Amaranth has certainly rocked the hedge fund community
as they continue their exit strategy. "The funds have been huge sellers," one
broker noted adding that they expect prices to dip further. The Goldman Sachs
Commodity Index, the bellweather for the investment community, has also fallen
heavily.
The index has fallen 9.79% year to date according to the company's
website, partly due to the heavy losses in crude oil futures, which have shed
over 20% since the beginning of August.
--Paul Wightman, paul_wightman@platts.com

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