Market watch: Cold snap heats up natural gas futures prices

By OGJ editors

HOUSTON, Oct. 14 -- An early cold front sparked a jump in natural gas futures prices Friday "to highs not seen since June 2001," said analysts at Enerfax Daily.

Futures prices for oil and petroleum products also increased, as the US Congress authorized President George W. Bush to act unilaterally against Iraq. Investigations indicating that a terrorist attack was responsible for an explosion on a French oil tanker near Yemen also prompted traders to cover short positions ahead of the weekend.

Since lumbering VLCC and ULCC tankers are vulnerable to such attacks, analysts fear that a rise in insurance premiums for such vessels could add to the cost of oil.

However, analysts said the London market in early trading Monday virtually dismissed the weekend bomb attack on a tourist spot in Bali that left 190 dead and 300 injured. Asian energy markets are expecting to see a surge in oil prices this week out of fear of additional terrorist attacks.

The November natural gas contract jumped 31.8¢ to $4.15/Mcf Friday on the New York Mercantile Exchange as traders reacted to the cold front that penetrated into Texas over the weekend. The market also was influenced by cuts in offshore gas production caused by Hurricane Lili. The combined impact of Lili and Tropical Storm Isidore shut in 2 bcfd of natural gas production in the central Gulf of Mexico off Louisiana for 4 weeks through Oct. 4, said Stephen Smith of Stephen Smith Energy Associates, Natchez, Miss., in a report issued Monday.

Friday's gas market "rallied early on a mix of fund buying, along with key marketers furiously covering short positions, taking out all the technical resistance. The market cooled off somewhat after lunch, but finished with a flurry. Fund buying continued from the opening bell. Traders pointed to this week's early season cold front as a one reason for marketers and locals to be buying ahead of the weekend," said Enerfax Daily analysts.

The November contract for benchmark US light, sweet crudes advanced by 40¢ to $29.37/bbl on NYMEX, while the December position was up 36¢ to $29.43/bbl. Unleaded gasoline for November delivery popped up 1.55¢ to 82.01¢/gal. Heating oil for the same month increased 0.67¢ to 78.97¢/gal.

In London, the November contract for North Sea Brent oil increased by 25¢ to $27.99/bbl Friday on the International Petroleum Exchange. It was hovering just under $28/bbl in early trading Monday. The November natural gas contract was up 8.4¢ to the equivalent of $3.29/Mcf Friday on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 21¢ to $27.78/bbl Friday.

However, for all of last week, the average OPEC basket price was down 36¢ to $27.98/bbl. So far this year, OPEC's basket price has averaged $23.70/bbl, compared with an average price of $23.12/bbl for all of 2001.

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