IPE Brent eases after US-led spike on heating oil supply concerns

London (Platts)--27Sep2005

Brent crude futures on London's International Petroleum exchange eased
early Tuesday in profit-taking after refining capacity and heating oil supply
concerns as the US winter approaches pushed the NYMEX front-month contract
higher Monday. 
     At 1040 GMT, the November IPE Brent crude futures contract was down 62
cts at $63.37/bbl. The November NYMEX WTI contract surged over $1.63/bbl
Monday on concerns about heating oil supplies and refining capacity in the US.
    "The previous evening's rally was fueled by heating oil essentially. I
think this morning a few people decided to make a little bit of money as they
cannot see any fresh news coming until tomorrow in the form of the US
Department of Energy inventory report," a trader said.
     The fourth quarter of 2005 is only three trading days away and is
typically the period with the highest demand, the trader added. NYMEX heating
oil has taken over the mantle as the leading energy complex driver as the US
enters the winter months. 
     High prices are also being driven by concern of US refining capacity in
the wake of Hurricane Rita. About 3.5-mil b/d of US refining capacity was down
as of Monday, an improvement from the 4.7-mil b/d that was off-line on Friday
and Saturday, as the storm moved toward the Texas and Louisiana coasts, the US
Department of Energy said. 
     OPEC's attempts at cooling high crude prices have not yet been successful
it seems. The cartel, which earlier this month decided to put 2-mil b/d of
extra crude supplies on offer in the market, had not found any takers for the
additional barrels, Saudi oil minister Ali Naimi said Tuesday. 
     Meanwhile, front-month October IPE gasoil futures bucked the downward
trend of the market and were up around $9.00/mt. The contract jumped Monday in
line with NYMEX heating oil gains, as analysts expect 5.4-mil bbl of lost
distillate production due to tightening refinery capacities, but Tuesday
morning continued to rise despite October heating oil falling.

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