NEW YORK MERCANTILE EXCHANGE (NMX) NEWS

NYMEX Oil Complex Soars on Weather Concerns, Refinery Fire
August 17, 2007 5:42:PM ET
By John Troland
Houston, TX - The NYMEX September crude, RBOB gasoline and heating oil contracts finished the day well above Thursday's close. The rally was due to renewed concerns the Hurricane Dean will strengthen into a category 3 to 5 hurricane and possibly move into the Gulf of Mexico sometime next week. In addition, prices got a boost from news late yesterday that Chevron's 330,000 bpd refinery in Pascagoula, MS experienced a fire in one of its two 160,000 bpd crude unit. Currently there is no word on how much damage was done by the fire or how long before the unit can be brought back into operation.
Today Hurricane Dean created much of the short-term concern as traders can remember the devastating affects from Hurricanes Katrina and Rita back in August and September 2005. The combination of those two storms wreaked havoc on oil production in the Gulf of Mexico and halted more than 4.5 million bpd of refining capacity, some of which was out of commission for an extended period of time. Current forecasts suggest that if Dean enters the Gulf, it would likely do so as a category 4 or 5 storm.
Our expectation for Monday's trading session is that prices will continue to move higher, especially if Dean is forecast to enter the Gulf of Mexico by mid week as some computer models suggest. Also we believe that traders will be a little hesitant to sell into the market until they have better information on what impact the Chevron fire will have on product supplies. Bad news on those two fronts could easily push crude another $1.00 or more, while products could jump 4-6 cents per gallon.
September crude settled at $71.98 up $0.98 from Thursday's settle. RBOB gasoline settled at $2.0388, up 6.05 cents per gallon from yesterday's $1.9783 settle. Heating oil settled 3.44 cents up from Thursday's settle of $1.9829 per gallon.
September domestic crude trading was slow today although there were a few trades done. LLS traded at a $0.35 premium to WTI while HLS was rumored done at a 70 cents discount to WTI. WTS traded at a $6.00 discount to WTI. Mars sour traded at a $5.30 discount while Poseidon sour was done at a $5.25 discount.
Cash products trading was more talk than action but some deals were reported in both gasoline and distillate fuels. A few traders told us trades were done at higher differentials to the September NYMEX RBOB gasoline and heating oil contracts although most deals were for short-term needs. The cash differentials were sharply higher due to the news about Chevron's refinery fire. A 160,000 bpd crude unit is down due to the fire. Currently there is no word as to the extent of damage or when the unit will be able to return to service. Most trades today were for volumes needed in the short-tern, especially in the Group and Chicago areas that have been concerned about tightness in product supplies. Today's news that the 108,000 bpd refinery at Coffeyville, Kansas has restarted will alleviate some supply concerns in the region. The refinery is said to be running about 98,000 bpd.
The October paper Brent market last traded at $70.29 per barrel.