Energy shares rose Thursday as a storm threat in the Gulf of Mexico and record oil prices stoked buying.
The Amex Oil Index (XOI:1,460.56, +6.14, +0.4%) rose 0.5%, as oil advanced as much as $1.07 to $83.20, another intraday record.
Valero (VLO:70.09, +0.52, +0.7%) rose 1% to $70.32. Exxon Mobil (XOM:92.09, -0.03, 0.0%) rose 25 cents to $92.37.
The Amex Natural Gas Index (XNG:517.94, -0.99, -0.2%) traded little-changed at 518, after natural-gas inventories rose by 63 billion cubic feet for the week ended Sept. 14, the Energy Department said Thursday. Analysts expected a climb of 79 billion. Total natural gas stocks now stand at 3.132 trillion cubic feet, down 32 billion cubic feet from the year-ago level, but 238 billion cubic feet above the five-year average, the government data said.
The Philadelphia Oil Service Index ($OSX:296.68, +3.58, +1.2%) rose 0.9%. Overall, the energy sector fared better than the overall market, dragged down by a profit warning from FedEx (FDX: 104.45, -3.06, -2.8%) and other economic jitters.
Approximately 27.7% of the oil production in the Gulf of Mexico has been shut-in, roughly 360,169 barrels of oil a day, the Minerals Management Service said in an afternoon update. It is also estimated that approximately 16.7% of the natural gas production in the gulf has been shut-in, roughly 1,288 million cubic feet of gas per day.
Personnel have been evacuated from a total of five production platforms in the face of foul weather in the Gulf of Mexico, equivalent to 0.6% of the 834 manned platforms in the gulf. BP (BP: 71.05, +0.52, +0.7%) said Thursday it's begun shutting down some energy production on platforms in the Gulf of Mexico in the face of a storm system off the coast of Florida. The oil giant has evacuated non-essential personnel and it's beginning to move production personnel back to shore. BP did not provide any specific figures on production cuts or the number of people affected.
Other oil and gas producers took similar actions. Cameron International Corp. (CAM:92.74, +0.49, +0.5%) fell 77 cents to $91.48 after Capital One Southcoast Inc. maintained its buy rating on the stock. Fmc Technologies (FTI:55.60, +0.15, +0.3%) rose 5 cents to $55.50 after Capital One Southcoast Inc. cut its rating on the stock to hold from buy.
Rowan Companies Inc. (RDC:37.39, -0.23, -0.6%) fell 8 cents to $37.54 after it released its monthly fleet status, which met Capital One Southcoast Inc.'s target.
Early Thursday, the National Hurricane Center said weather patterns suggest a subtropical or a tropical cyclone to form as a storm system moves west into the eastern Gulf of Mexico. Heavy rainfall is possible over portions of the Southeastern U.s. during the next day or two.
Crude futures rally past $83 to another record
Crude-oil futures closed above $83 a barrel Thursday, sending the expiring benchmark contract further into uncharted territory on news that oil facilities in the Gulf of Mexico shut down 28% of production ahead of what's expected to become the tenth named storm of the Atlantic hurricane season.
Crude oil for October delivery briefly climbed as high as $84.10 a barrel in electronic trading, a level never before seen by a front-month contract. It closed up $1.39, or 1.7%, at $83.32 after reaching $83.90 during the regular trading session on the New York Mercantile Exchange he expiration of the October crude contracts at the end of the day's session likely added to the market volatility. November became the lead-month contract at the close. That contract closed up 93 cents at $81.78.
Also, about 16.7% of natural-gas production in the Gulf has been shut-in, MMS said.
Extended rally
"As long as inventories of crude keep dropping, I think we can expect the price to keep rising," said Charles Perry, chairman of energy-consulting firm Perry Management.
But he said the Organization of the Petroleum Exporting Countries is concerned about the price climb. The group of key oil producers would "really like to se the price fall, and [that] may cause them to increase production," said Perry.
"What Organization of the Petroleum Exporting Countries fears is conservation and alternate fuels, both of which are encouraged by higher prices," he said.
Natural-gas futures drop
Two forces really hit the market into the close: the potential storm and the futures contract expiration, said Phil Flynn, a senior analyst at Alaron Trading.
An area of low pressure has entered the Gulf of Mexico and could become a tropical depression in the next 12 to 24 hours, Accuweather.com reported Thursday afternoon. The system could become Tropical Storm Jerry on Friday, it said.
The system is expected to move toward Texas or Louisiana over the weekend, threatening gas and oil fields as well as refineries in the northwest Gulf and nearby coastal areas, it said.
"Traders are taking this very seriously," said Flynn. They "learned a lesson from Hurricane Humberto that these things can develop quickly. Producers in the Gulf aren't taking any chances and shutting down production."
Oil and gas operations in the Gulf have started to evacuate platforms and rigs in the path of what's currently called Tropical Area of Investigation 93 L, according to the U.S. Minerals Management Service.
MMS estimates that about 27.5% of oil production in the Gulf has been shut in, or roughly 360,169 barrels of oil per day. It points out that estimate oil output from the Gulf as of April 2007 was 1.3 million barrels of oil per day.
Also, about 16.7% of natural-gas production in the Gulf has been shut-in, MMS said.
Extended rally
Still, after hitting consecutive highs, oil prices may be a bit tired.
"There is no doubt that after setting six-consecutive records, crude prices are severely overbought and due for a pullback," said Edward Meir, analyst at MF Global, in a research note.
"However, yesterday did not seem to be the time for such a decline, as the combination of constructive Energy Information Administration numbers, weather concerns, and a continuation of the 'relief rally' engineered by the Fed on Tuesday, all combined to keep the crude complex well bid," Meir said.
Recent storm activity has contributed to declines in U.S. refinery activity. Refinery utilization fell to 89.6% of capacity for the week ended Sept. 14, from 90.5% a week earlier, the Energy Department reported Wednesday.
At the same time, crude supplies fell by 3.8 million barrels, motor gasoline inventories climbed by 400,000 barrels and distillate supplies rose by 1.5 million last week, the report said.
On Thursday, October reformulated gasoline closed at $2.1351 a gallon, up 4.17 cents, or 2%. October heating oil closed up 1.56 cents at $2.2609 a gallon.
"As long as inventories of crude keep dropping, I think we can expect the price to keep rising," said Charles Perry, chairman of energy-consulting firm Perry Management.
But he said the Organization of the Petroleum Exporting Countries is concerned about the price climb. The group of key oil producers would "really like to se the price fall, and [that] may cause them to increase production," said Perry.
"What Organization of the Petroleum Exporting Countries fears is conservation and alternate fuels, both of which are encouraged by higher prices," he said.
Crude "supply is still above the five-year average yet because of the talk of global tight supply in the fourth quarter, for now the crude market seems less than impressed," said Alaron's Flynn.
"Still my long-term yearly technical target is within reach, and the fact that supplies are above the five-year average might soon produce a little relief that makes the risks to the consumer defiantly on the upside," he said.
In other energy-related news, the New York Mercantile Exchange Inc. (NMX: 123.30, -0.05, 0.0%) said Thursday that it set a daily volume record for crude oil futures on the CME Globex electronic trading platform on Wednesday. Crude-oil futures hit a record 626,447 contracts, exceeding the 616,688 contracts traded on Sept. 6.
Natural-gas futures drop
Also on Nymex, natural-gas futures prices fell to their lowest level in more than a week after the Energy Department reported early Thursday that supplies of the commodity in storage rose 63 billion cubic feet for the week ended Sept. 14. MF Global had said market expectations call for a rise of 58 billion cubic feet to 78 billion cubic feet.
Analysts at Strategic Energy & Economic Research expected to see a climb of 71 billion cubic feet. Overall supplies were still at the upper end of the five-year average and there's still a month and a half left in the supply injection season, said Beth Sewell, a managing partner at Quantum Gas & Power Services. Total stocks now stand at 3.132 trillion cubic feet, down 32 billion cubic feet from the year-ago level, but 238 billion cubic feet above the five-year average, the government data said.
Analysts at Strategic Energy & Economic Research expected to see a climb of 71 billion cubic feet. Overall supplies were still at the upper end of the five-year average and there's still a month and a half left in the supply injection season, said Beth Sewell, a managing partner at Quantum Gas & Power Services. Total stocks now stand at 3.132 trillion cubic feet, down 32 billion cubic feet from the year-ago level, but 238 billion cubic feet above the five-year average, the government data said.
Natural gas for October delivery fell 17.2 cents, or 2.8%, to close at $6.008 per million British thermal units. It fell as low as $5.955 earlier. Still, the market is a bit "mixed because of the potential storm that's over Florida right now," said Sewell.
In Thursday's trading in energy equities, oil and gas stocks mainly higher, with the Philadelphia Oil Service Index ($OSX: 296.68, +3.58, +1.2%) marking the largest gains.
Elsewhere on the commodity markets, gold futures rallied, as the dollar hit a new all-time low against the euro. Taking a broad measure of the commodities markets, the Dow Jones AIG Commodity Index was up 1% at 177.60 points.
Via| MarketWatch |by Steve Gelsi | by Myra P. Saefong & Polya Lesova
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