US Oil, Gas Production to Climb While US Energy Consumption Declines

U.S. oil and gas production will continue to rise through 2040 from 2010 levels as unconventional oil and gas resources and production from the deepwater Gulf of Mexico come online, while U.S. energy consumption is forecast to decline during the same time period, ExxonMobil Corp. reported in its 2013 energy outlook.

U.S. oil and gas production has grown to its highest level in three decades, thanks to technological advances that have allowed the oil and gas industry to access deepwater resources as well as unlock unconventional oil and gas resources such as the Bakken oil play in North Dakota, according to ExxonMobil's energy outlook.

The projected 6 percent decline between 2010 and 2040, or an average .2 percent decline per year, in U.S. energy consumption will occur even as the U.S. population grows an average of .7 percent a year from 2000 through 2040, or 20 percent more people by 2040, and the nation's gross domestic product grows an average 2.3 percent a year during that time period, basically doubling the economic output of the United States, said William Colton, vice president of corporate strategic planning at ExxonMobil, at a Wednesday presentation at Rice University in Houston. The findings of ExxonMobil's first U.S.-focused edition of its energy outlook are "pretty startling", said Colton, and indicate a more efficient use of energy across the board, from transportation to office buildings to industrial applications.

"This is an incredible achievement, a great accomplishment and good for the economy," Colton commented, who noted that the outlook for the United States has never been more positive in terms of geologic and human resources.

Energy demand in countries outside the United States is forecast to grow 35 percent through 2040, mostly driven by population and economic growth in developing countries such as China and India as well as fast-developing countries in Asia Pacific, Africa, the Middle East and Latin America, Colton noted. During the 2010 to 2040 timeframe, the world population will grow to 9 billion and the global economy will double.

"It's really about standard of living – they want safe homes, cars and refrigerators, but all these require energy," said Colton.

Electricity demand will be the single biggest driver of energy in the United States, with 30 percent growth by 2040, followed by the transportation and industrial sectors. An examination of the capital, fuel and operating costs for gas, coal, nuclear, wind and solar shows natural gas and coal as the most economic for power generation. When accounting for a $60/ton cost for carbon dioxide emissions, gas and nuclear become the most cost efficient. While the straight economics on nuclear power look great, facility siting and social issues, particularly in a post-Fukushimu world, mean limited options for nuclear exist.

ExxonMobil forecasts flat demand in the U.S. transportation sector. In the transportation sector, fuel demand for light-duty vehicles will fall even as the number of light-duty vehicles on U.S. roads grow thanks to better fuel economy and smaller size of these vehicles. Meanwhile, fuel demand will grow for heavy-duty vehicles, and full hybrid vehicles such as the Toyota Prius will become more common on U.S. roads, said Colton. Most of the efficiency is being driven by government policy, such as the CAFÉ standards in the United States.

U.S. natural gas production is now at an all-time high thanks to shale boom, and is expected to rise by 45 percent between 2010 and 2040. By 2040, nearly 80 percent of North America gas supplies will be produced from local unconventional resources, according to ExxonMobil. Even with the projected increase in gas production through 2040, North America will continue to have significant gas resources in the ground, an estimated 100 years supply at current consumption rates; this figure could potentially grow at technology advances.

After decades of relatively flat production, North America oil and liquids output is expected to grow by 40 percent from 2010 to 2040. Conventional crude production is expected to decline, while production from unconventional resources is expected to rise, ExxonMobil said in its report. The biggest contributor to unconventional oil production will be from Canadian oil sands, which is expected to produce approximately 4.5 million barrels of oil per day by 2040. A doubling of deepwater production, mostly in the U.S. Gulf of Mexico, will be another major contributor in oil production gains.

Even though North America is approaching a time when it produces more energy than it consumes, the region will still benefit from access to the global energy market.

"The value of free trade –whether imports or exports – is a fundamental principle of modern economics, and is critical to U.S. energy security, economic growth and competitiveness in the global marketplace," ExxonMobil said in its U.S. energy outlook.

The combination of steep gains in energy production and modest declines in U.S. consumption – will allow North America to become a net energy exporter by around 2025. The United States' changing role as a net energy exporter also will bring significant benefits to the U.S. economy, including those associated with liquefied natural gas exports, such as increased manufacturing activity, new jobs, lower energy costs for businesses and consumers, and billions in taxes and government revenue, ExxonMobil said in the report.

Reduced U.S. energy consumption also will provide environmental benefits, particularly when combined with the United States' shift away from coal to natural gas. ExxonMobil forecasts U.S. carbon dioxide emissions by 2040 to fall to levels not seen since the 1970s.

Events such as last year's Arab spring and the January terrorist takeover of the In Amenas Algeria gas production plant are examples of some of the geopolitical challenges that oil and gas companies' operating internationally must manage. However, North American regulatory uncertainty, such as whether the Keystone XL pipeline will be approved, also poses a geopolitical risk that should not be discounted, said Kenneth Cohen, vice president of public and government affairs at ExxonMobil.

"The above ground risk equals or exceeds the geologic risk" faced by oil and gas companies operating in the United States, said Cohen.

ExxonMobil welcomes effective, science-based regulations, Colton said, but sees state-based regulations for U.S. onshore shale production as the best solution. The company remains optimistic on the outlook for U.S. shale drilling, despite the 2014 release of the U.S. Environmental Protection Agency's (EPA) study next year of hydraulic fracturing's impact on U.S. water supplies. Additionally, nine other government agencies are conducting their own studies into hydraulic fracturing.

ExxonMobil expects to remain active in the U.S. Gulf of Mexico (GOM), despite its recent divestment of 20 Gulf of Mexico blocks. The amount of resources available in the deepwater GOM represents the equivalent of Saudi Arabia production, Colton said. The company has four important projects underway in the GOM, including Lucius and Hadrian South, which are expected to come online in 2014. ExxonMobil is also pursuing the Hadrian North and Julia projects in the GOM, according to the company's analyst meeting presentation earlier this month.

Despite its lack of success in exploring Poland's shale gas resource potential, the company is well-positioned to explore global shale assets, Colton said, noting that shale exploration outside the United States remains in its early days, meaning it's too early to forecast the outlook for international shale resources.

ExxonMobil's global production forecast does not include methane hydrates, which Japan has recently conducted production tests for and is viewed as the next big thing in the oil and gas industry. Methane hydrates lie on the horizon, but Colton said ExxonMobil researchers are "keenly aware of them."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

US Oil, Gas Production to Climb While US Energy Consumption Declines

U.S. oil and gas production will continue to rise through 2040 from 2010 levels as unconventional oil and gas resources and production from the deepwater Gulf of Mexico come online, while U.S. energy consumption is forecast to decline during the same time period, ExxonMobil Corp. reported in its 2013 energy outlook.

U.S. oil and gas production has grown to its highest level in three decades, thanks to technological advances that have allowed the oil and gas industry to access deepwater resources as well as unlock unconventional oil and gas resources such as the Bakken oil play in North Dakota, according to ExxonMobil's energy outlook.

The projected 6 percent decline between 2010 and 2040, or an average .2 percent decline per year, in U.S. energy consumption will occur even as the U.S. population grows an average of .7 percent a year from 2000 through 2040, or 20 percent more people by 2040, and the nation's gross domestic product grows an average 2.3 percent a year during that time period, basically doubling the economic output of the United States, said William Colton, vice president of corporate strategic planning at ExxonMobil, at a Wednesday presentation at Rice University in Houston. The findings of ExxonMobil's first U.S.-focused edition of its energy outlook are "pretty startling", said Colton, and indicate a more efficient use of energy across the board, from transportation to office buildings to industrial applications.

"This is an incredible achievement, a great accomplishment and good for the economy," Colton commented, who noted that the outlook for the United States has never been more positive in terms of geologic and human resources.

Energy demand in countries outside the United States is forecast to grow 35 percent through 2040, mostly driven by population and economic growth in developing countries such as China and India as well as fast-developing countries in Asia Pacific, Africa, the Middle East and Latin America, Colton noted. During the 2010 to 2040 timeframe, the world population will grow to 9 billion and the global economy will double.

"It's really about standard of living – they want safe homes, cars and refrigerators, but all these require energy," said Colton.

Electricity demand will be the single biggest driver of energy in the United States, with 30 percent growth by 2040, followed by the transportation and industrial sectors. An examination of the capital, fuel and operating costs for gas, coal, nuclear, wind and solar shows natural gas and coal as the most economic for power generation. When accounting for a $60/ton cost for carbon dioxide emissions, gas and nuclear become the most cost efficient. While the straight economics on nuclear power look great, facility siting and social issues, particularly in a post-Fukushimu world, mean limited options for nuclear exist.

ExxonMobil forecasts flat demand in the U.S. transportation sector. In the transportation sector, fuel demand for light-duty vehicles will fall even as the number of light-duty vehicles on U.S. roads grow thanks to better fuel economy and smaller size of these vehicles. Meanwhile, fuel demand will grow for heavy-duty vehicles, and full hybrid vehicles such as the Toyota Prius will become more common on U.S. roads, said Colton. Most of the efficiency is being driven by government policy, such as the CAFÉ standards in the United States.

U.S. natural gas production is now at an all-time high thanks to shale boom, and is expected to rise by 45 percent between 2010 and 2040. By 2040, nearly 80 percent of North America gas supplies will be produced from local unconventional resources, according to ExxonMobil. Even with the projected increase in gas production through 2040, North America will continue to have significant gas resources in the ground, an estimated 100 years supply at current consumption rates; this figure could potentially grow at technology advances.

After decades of relatively flat production, North America oil and liquids output is expected to grow by 40 percent from 2010 to 2040. Conventional crude production is expected to decline, while production from unconventional resources is expected to rise, ExxonMobil said in its report. The biggest contributor to unconventional oil production will be from Canadian oil sands, which is expected to produce approximately 4.5 million barrels of oil per day by 2040. A doubling of deepwater production, mostly in the U.S. Gulf of Mexico, will be another major contributor in oil production gains.

Even though North America is approaching a time when it produces more energy than it consumes, the region will still benefit from access to the global energy market.

"The value of free trade –whether imports or exports – is a fundamental principle of modern economics, and is critical to U.S. energy security, economic growth and competitiveness in the global marketplace," ExxonMobil said in its U.S. energy outlook.

The combination of steep gains in energy production and modest declines in U.S. consumption – will allow North America to become a net energy exporter by around 2025. The United States' changing role as a net energy exporter also will bring significant benefits to the U.S. economy, including those associated with liquefied natural gas exports, such as increased manufacturing activity, new jobs, lower energy costs for businesses and consumers, and billions in taxes and government revenue, ExxonMobil said in the report.

Reduced U.S. energy consumption also will provide environmental benefits, particularly when combined with the United States' shift away from coal to natural gas. ExxonMobil forecasts U.S. carbon dioxide emissions by 2040 to fall to levels not seen since the 1970s.

Events such as last year's Arab spring and the January terrorist takeover of the In Amenas Algeria gas production plant are examples of some of the geopolitical challenges that oil and gas companies' operating internationally must manage. However, North American regulatory uncertainty, such as whether the Keystone XL pipeline will be approved, also poses a geopolitical risk that should not be discounted, said Kenneth Cohen, vice president of public and government affairs at ExxonMobil.

"The above ground risk equals or exceeds the geologic risk" faced by oil and gas companies operating in the United States, said Cohen.

ExxonMobil welcomes effective, science-based regulations, Colton said, but sees state-based regulations for U.S. onshore shale production as the best solution. The company remains optimistic on the outlook for U.S. shale drilling, despite the 2014 release of the U.S. Environmental Protection Agency's (EPA) study next year of hydraulic fracturing's impact on U.S. water supplies. Additionally, nine other government agencies are conducting their own studies into hydraulic fracturing.

ExxonMobil expects to remain active in the U.S. Gulf of Mexico (GOM), despite its recent divestment of 20 Gulf of Mexico blocks. The amount of resources available in the deepwater GOM represents the equivalent of Saudi Arabia production, Colton said. The company has four important projects underway in the GOM, including Lucius and Hadrian South, which are expected to come online in 2014. ExxonMobil is also pursuing the Hadrian North and Julia projects in the GOM, according to the company's analyst meeting presentation earlier this month.

Despite its lack of success in exploring Poland's shale gas resource potential, the company is well-positioned to explore global shale assets, Colton said, noting that shale exploration outside the United States remains in its early days, meaning it's too early to forecast the outlook for international shale resources.

ExxonMobil's global production forecast does not include methane hydrates, which Japan has recently conducted production tests for and is viewed as the next big thing in the oil and gas industry. Methane hydrates lie on the horizon, but Colton said ExxonMobil researchers are "keenly aware of them."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Oil Futures Climb to Two-Week High Ahead of Inventory Data

U.S. crude-oil futures ground higher Tuesday, pushing to a two-week high as investors await government data on U.S. oil supplies.

Light, sweet crude for April delivery settled up 48 cents, or 0.5%, at $92.54 a barrel on the New York Mercantile Exchange, the fourth-straight session of gains and the highest settlement since Feb. 27.

Brent crude on the ICE futures exchange fell 57 cents to settle at $109.65 a barrel.

Oil prices continued the bounce from lows near $90 a barrel earlier this month. Analysts and traders said they were looking ahead to Wednesday's release of U.S. oil inventories data for signs on whether the rally can be sustained.

U.S. crude-oil stockpiles are expected to rise by 2.4 million barrels in data due 10:30 a.m. EDT Wednesday from the Energy Information Administration, according to a Dow Jones Newswires survey of analysts. If the estimate is correct, oil inventories will be at the highest level ever for this time of year.

The American Petroleum Institute, an industry group, will release its own data at 4:30 p.m. EDT Tuesday.

Gasoline stocks are seen falling by 1.2 million barrels in the EIA data, and stocks of distillate, which include heating oil and diesel, are seen falling by 1.9 million barrels.

Oil prices have slumped from highs near $98 a barrel earlier this year amid rising domestic supplies. But improving economic data in recent weeks, including Friday's larger-than-anticipated increase in U.S. employment, have helped halt the decline.

"With overall improving economic data, I'd say there is a slight bias higher, but not that much given that inventories are still as high as they are in the U.S," said Kyle Cooper, managing partner at IAF Advisors in Houston. He added that in weekly EIA data, "Crude inventories are probably going to build again, crude production is still high, crude demand is still low."

Some analysts said this week's recovery appeared to be technically driven after U.S. prices failed to make a renewed push below $90 a barrel, which is a key support level on trading charts.

But market watchers added they were still scratching their heads over the rise, as the fundamentals for the global oil market haven't changed and latest assessments may point to steady, rather than higher prices.

OPEC said in its monthly report that non-OPEC output, led by growth in output from U.S. shale-oil fields, will rise by 1 million barrels a day this year.

The EIA forecast in its short-term energy outlook Tuesday that U.S. crude-oil output will top net imports for the first time in more than 17 years this autumn.

News that more of the world's oil supply is in the hands of producers that wouldn't regularly adjust output to support prices, as the Organization of the Petroleum Exporting Countries often does, would be a stabilizing force for global oil prices, analysts said.

April-delivery reformulated gasoline blendstock futures settled 0.22 cent lower at $3.1502 a gallon. April heating oil settled 2.07 cents lower, at $2.9484 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

US Oil, Gas Production to Climb While US Energy Consumption Declines

U.S. oil and gas production will continue to rise through 2040 from 2010 levels as unconventional oil and gas resources and production from the deepwater Gulf of Mexico come online, while U.S. energy consumption is forecast to decline during the same time period, ExxonMobil Corp. reported in its 2013 energy outlook.

U.S. oil and gas production has grown to its highest level in three decades, thanks to technological advances that have allowed the oil and gas industry to access deepwater resources as well as unlock unconventional oil and gas resources such as the Bakken oil play in North Dakota, according to ExxonMobil's energy outlook.

The projected 6 percent decline between 2010 and 2040, or an average .2 percent decline per year, in U.S. energy consumption will occur even as the U.S. population grows an average of .7 percent a year from 2000 through 2040, or 20 percent more people by 2040, and the nation's gross domestic product grows an average 2.3 percent a year during that time period, basically doubling the economic output of the United States, said William Colton, vice president of corporate strategic planning at ExxonMobil, at a Wednesday presentation at Rice University in Houston. The findings of ExxonMobil's first U.S.-focused edition of its energy outlook are "pretty startling", said Colton, and indicate a more efficient use of energy across the board, from transportation to office buildings to industrial applications.

"This is an incredible achievement, a great accomplishment and good for the economy," Colton commented, who noted that the outlook for the United States has never been more positive in terms of geologic and human resources.

Energy demand in countries outside the United States is forecast to grow 35 percent through 2040, mostly driven by population and economic growth in developing countries such as China and India as well as fast-developing countries in Asia Pacific, Africa, the Middle East and Latin America, Colton noted. During the 2010 to 2040 timeframe, the world population will grow to 9 billion and the global economy will double.

"It's really about standard of living – they want safe homes, cars and refrigerators, but all these require energy," said Colton.

Electricity demand will be the single biggest driver of energy in the United States, with 30 percent growth by 2040, followed by the transportation and industrial sectors. An examination of the capital, fuel and operating costs for gas, coal, nuclear, wind and solar shows natural gas and coal as the most economic for power generation. When accounting for a $60/ton cost for carbon dioxide emissions, gas and nuclear become the most cost efficient. While the straight economics on nuclear power look great, facility siting and social issues, particularly in a post-Fukushimu world, mean limited options for nuclear exist.

ExxonMobil forecasts flat demand in the U.S. transportation sector. In the transportation sector, fuel demand for light-duty vehicles will fall even as the number of light-duty vehicles on U.S. roads grow thanks to better fuel economy and smaller size of these vehicles. Meanwhile, fuel demand will grow for heavy-duty vehicles, and full hybrid vehicles such as the Toyota Prius will become more common on U.S. roads, said Colton. Most of the efficiency is being driven by government policy, such as the CAFÉ standards in the United States.

U.S. natural gas production is now at an all-time high thanks to shale boom, and is expected to rise by 45 percent between 2010 and 2040. By 2040, nearly 80 percent of North America gas supplies will be produced from local unconventional resources, according to ExxonMobil. Even with the projected increase in gas production through 2040, North America will continue to have significant gas resources in the ground, an estimated 100 years supply at current consumption rates; this figure could potentially grow at technology advances.

After decades of relatively flat production, North America oil and liquids output is expected to grow by 40 percent from 2010 to 2040. Conventional crude production is expected to decline, while production from unconventional resources is expected to rise, ExxonMobil said in its report. The biggest contributor to unconventional oil production will be from Canadian oil sands, which is expected to produce approximately 4.5 million barrels of oil per day by 2040. A doubling of deepwater production, mostly in the U.S. Gulf of Mexico, will be another major contributor in oil production gains.

Even though North America is approaching a time when it produces more energy than it consumes, the region will still benefit from access to the global energy market.

"The value of free trade –whether imports or exports – is a fundamental principle of modern economics, and is critical to U.S. energy security, economic growth and competitiveness in the global marketplace," ExxonMobil said in its U.S. energy outlook.

The combination of steep gains in energy production and modest declines in U.S. consumption – will allow North America to become a net energy exporter by around 2025. The United States' changing role as a net energy exporter also will bring significant benefits to the U.S. economy, including those associated with liquefied natural gas exports, such as increased manufacturing activity, new jobs, lower energy costs for businesses and consumers, and billions in taxes and government revenue, ExxonMobil said in the report.

Reduced U.S. energy consumption also will provide environmental benefits, particularly when combined with the United States' shift away from coal to natural gas. ExxonMobil forecasts U.S. carbon dioxide emissions by 2040 to fall to levels not seen since the 1970s.

Events such as last year's Arab spring and the January terrorist takeover of the In Amenas Algeria gas production plant are examples of some of the geopolitical challenges that oil and gas companies' operating internationally must manage. However, North American regulatory uncertainty, such as whether the Keystone XL pipeline will be approved, also poses a geopolitical risk that should not be discounted, said Kenneth Cohen, vice president of public and government affairs at ExxonMobil.

"The above ground risk equals or exceeds the geologic risk" faced by oil and gas companies operating in the United States, said Cohen.

ExxonMobil welcomes effective, science-based regulations, Colton said, but sees state-based regulations for U.S. onshore shale production as the best solution. The company remains optimistic on the outlook for U.S. shale drilling, despite the 2014 release of the U.S. Environmental Protection Agency's (EPA) study next year of hydraulic fracturing's impact on U.S. water supplies. Additionally, nine other government agencies are conducting their own studies into hydraulic fracturing.

ExxonMobil expects to remain active in the U.S. Gulf of Mexico (GOM), despite its recent divestment of 20 Gulf of Mexico blocks. The amount of resources available in the deepwater GOM represents the equivalent of Saudi Arabia production, Colton said. The company has four important projects underway in the GOM, including Lucius and Hadrian South, which are expected to come online in 2014. ExxonMobil is also pursuing the Hadrian North and Julia projects in the GOM, according to the company's analyst meeting presentation earlier this month.

Despite its lack of success in exploring Poland's shale gas resource potential, the company is well-positioned to explore global shale assets, Colton said, noting that shale exploration outside the United States remains in its early days, meaning it's too early to forecast the outlook for international shale resources.

ExxonMobil's global production forecast does not include methane hydrates, which Japan has recently conducted production tests for and is viewed as the next big thing in the oil and gas industry. Methane hydrates lie on the horizon, but Colton said ExxonMobil researchers are "keenly aware of them."

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Crude-Oil Futures Climb to 19-Week High; Gasoline Futures Rally for 8th Day

NEW YORK--Crude-oil futures prices posted modest gains Monday, settling at a 19-week high, while concerns over tight mid-Atlantic gasoline supplies pushed futures up for an eighth straight day.

Oil futures climbed early as the Commerce Department said December U.S. durable goods orders rose 4.6% from November, much stronger than the consensus call for a 2% rise. The data is the latest of recent strong indicators of a recovery in the U.S., the world's biggest oil consumer.

But after sluggish data on home sales and weakness in the broader equities market, crude turned down before regaining traction to tick up to a fresh high after failing to hold gains above $96 a barrel in the three prior sessions.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 56 cents at $96.44 a barrel, but off from its session high of $96.81 a barrel. The modest gain was enough to push crude to its highest settlement since Sept. 18, but traders said the path to further gains may not be smooth.

ICE North Sea Brent for March delivery settled up 20 cents at $113.48 a barrel, the highest price since Oct. 16.

"We've been gaining on signs of an economy recovery," which would spark higher demand for oil, said Carl Larry, president of Oil Outlooks and Opinions. Prospects for more gains are on hold until the market gets a read on U.S. oil inventory data, the view from the Federal Reserve's policy-making board, and the January nonfarm payrolls report.

Mr. Larry said crude oil prices, with the $97-a-barrel level in sight, may be poised to challenge $100 a barrel next week for the first time since May if the payroll report due Friday is supportive and heavy refinery maintenance work doesn't create a glut of crude oil in inventories.

Refiners last week cut crude oil processing rates to a 30-month low and sustained declines are expected.

Traders will be watching U.S. oil inventory data due at midweek to show the scope of inventory gains and refinery operations.

"If we don't get a big crude build, we will be going higher. That's the X factor here. It's all about the refineries," Mr. Larry said. He expects crude oil stocks to rise by 1.75 million barrels, which is at the low end of early forecasts.

Analysts surveyed by Dow Jones Newswires expect crude stocks to rise by 2.5 million barrels, with refinery operations inching up 0.1 percentage point from a 10-month low last week amid what is expected a busy quarter for seasonal maintenance work.

Jim Ritterbusch, president of Ritterbusch & Associates, said he sees crude struggling to hold above $96 in the near term due to reduced refiner demand. He estimated that first-quarter maintenance work could cut crude processing by about 9% to 10% of capacity, compared with a 7% in the first quarter of 2008, a period of heavy shutdowns. That would translate to around 1.6 million to 1.7 million barrels a day of crude capacity off line.

Concerns that refinery maintenance will further tighten gasoline inventories in the heavily populated mid-Atlantic region have thrust reformulated gasoline blendstock futures into the spotlight at a time when gasoline demand is the weakest of the year.

Heavy maintenance is expected to reduce gasoline production and tighten inventories. Gasoline stocks are high nationwide, but in the mid-Atlantic region, which includes the New York Harbor delivery point of the Nymex contract, they are nearly 15% below their five-year average level for this time of year, government data show.

Inventories were slim before Hurricane Sandy disrupted operations at refineries and terminals in the region, and haven't rebounded.

The specter for tighter-still supplies increased on Monday, when Hess Corp. said it will permanently shut its small Port Reading, N.J., refinery by the end of February. Energy Department data show the plant produces 27,000 barrels a day of gasoline, a fraction of the three million barrels a day or so consumed along the entire East Coast. Still, traders said, the closure will increase the need for imports to the region.

Gasoline prices in the mid-Atlantic region are among the highest in the nation, in part because crude imports in the region are tied to the price of internationally traded Brent crude oil, rather than abundant crude oil supplies in the Midwest, which keep prices down.

February-delivery contracts for reformulated gasoline blendstock futures settled 5.94 cents higher, or 2.1%, at $2.9348 a gallon, the highest price since Oct. 11. Prices have rallied 8.4%, or 22.82 cents a gallon, in the past eight sessions. That is the longest string of gains since the summer of 2011.

Gasoline demand is weakest at this time of year and can lag peak summer demand by as much as one million barrels a day.

RBOB for May delivery, so far this month, has averaged nearly 16 cents a gallon more than the February price. That is the highest May-to-February premium in four years, and suggests investors believe gasoline stocks will still be tight as the peak demand season begins.

February heating oil settled down 0.48 cent, at $3.0616 a gallon. The February heating oil and RBOB contracts expire at Thursday's settlement.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here