September 21, 2004
By Myra P. Saefong, CBS.MarketWatch.com
SAN FRANCISCO (CBS.MW) -- Crude futures climbed Tuesday afternoon, ready to tally a four-session winning streak with traders expecting this week's U.S. petroleum reports to reveal hefty declines in crude supplies because of hurricane disruptions to output and shipments in the Gulf of Mexico.
"Obviously, the impact of [Hurricane] Ivan will be felt in this week's inventory numbers," said Phil Flynn, a senior analyst at Alaron Trading in Chicago.
"More hurricane worries are on the horizon with [Hurricanes] Jeanne, Karl and [Tropical Storm] Lisa waiting in the wings, and hurricane season doesn't officially end until Nov. 30," he said.
The greatest threat comes from Tropical Storm Lisa, which "might make it to Florida next week as she's taking the same path as Ivan," he said.
Crude for October delivery traded at $47.05 a barrel on the New York Mercantile Exchange, up 70 cents. It has already gained $2.77 a barrel in the past three sessions and it is trading at a one-month high.
The November contract, which becomes the lead-month contract at the session's close, was up 63 cents at $46.82.
October unleaded gasoline tacked on 0.55 cent to $1.28 a gallon, and October heating oil climbed 2.51 cents to $1.291 a gallon.
Two separate updates on U.S. petroleum supplies are due Wednesday morning from the Energy Department and the American Petroleum Institute.
IFR Energy Services is expecting a drop of between 5 million and 8 million barrels in crude supplies for the week. Fimat USA expects a decline of 6.8 million barrels.
Distillate supplies, which include heating oil, probably fell 1 million to 2 million barrels, IFR said. Fimat said the decline is closer to the high end of that estimate.
IFR also anticipates a 1 million to 2 million-barrel decline in gasoline stocks last week. Fimat expected a decline of 2.5 million barrels.
"If the numbers are as bad as they were, or worse than last week, $50 will be within spitting distance," said Kevin Kerr, a senior trader at Kwest International.
For the week ended Sept. 10, the Energy Department reported a huge 7.1 million-barrel drop in crude supplies.
Aside from the supply expectations, the oil market remains on edge over the status of production from Russia as oil giant Yukos disclosed Monday that it will suspend about 1 million tons of its oil exports to China starting Sept. 28 and running through the end of this year. It blamed financing issues as it continues to battle a $3.4 billion back tax debt for the year 2000.
At the moment, the market is "seeing a lot of new buying in the crude, and especially the products like heating oil," said Kerr.
"As cold temps settle into the Northeast, look out -- drawdowns on supply for heating oil could dramatically dwindle," he said, adding that natural gas demand "could ratchet up quickly too."
Natural gas rises again
Elsewhere on Nymex, natural-gas prices headed higher again, even after climbing more than 10 percent in the past two sessions.
October natural gas traded up 17.1 cents, or 3.3 percent, at $5.42 per million British thermal units.
The market has found support as production companies assess the effect of Hurricane Ivan on natural-gas output in the Gulf.
But "growing inventories and mild weather should pressure prices unless another hurricane threatens the Gulf of Mexico," John Kilduff, an analyst at Fimat USA, said in a note to clients.
Analysts at energy-forecasting firm Enercast.com expect Thursday's Energy Department data to show an increase of 68 billion cubic feet in natural-gas supplies for the week ended Sept. 17. The climb is expected to be significantly smaller than the prior week's 100 billion-cubic-foot rise because of the output disruptions from the hurricane.
In equities, energy shares were broadly higher. The Philadelphia Oil Service Index gained ground after Jefferies & Co. said it remained bullish on the group.
In Nymex metals trading, gold futures climbed ahead of the Federal Reserve's expected decision to raise interest rates.
The Reuters/CRB index, a broad measure of commodity futures markets, was up 1.2 percent at 277.16 points.
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