Senior Staff Writer
HOUSTON, Sept. 29 -- Crude oil futures prices slipped slightly in London and New York Friday as the market adjusted to a production cut of 900,000 b/d, effective Nov. 1, by the Organization of Petroleum Exporting Countries.
Stephen D. Gengaro, a Jefferies & Co. Inc. analyst in New York, said Monday that OPEC's decision increased "confidence that the cartel will be able to successfully navigate through the next several quarters and maintain prices."
Jefferies raised its 2003 West Texas Intermediate (WTI) crude oil price forecast to $30/bbl from $29/bbl. The firm also raised its four-quarter estimate to $27/bbl from $26/bbl, and maintained its 2004 oil price forecast of $25/bbl.
"The key factors to solid crude oil prices in 2004 include moderately low current inventory levels, continued OPEC discipline, possible cooperation between OPEC and non-OPEC producers (especially the former Soviet Union) and solid demand growth. We expect Iraq production to rise gradually," Gengaro said.
During the next few years, Jefferies has a positive crude oil price outlook "predicated on slowing non-OPEC supply growth, which will enable OPEC to continue to act as the swing producer and manage worldwide oil supply and prices. Our preliminary 2005 WTI crude oil price forecast is $24."
Regarding Iraq, Gengaro believes that it will be at least late 2004 before Iraqi oil production can be sustained at or above earlier peaks of 3.5 million b/d.
Meanwhile, he also believes that Venezuela probably will produce less than its quota of 2.8 million b/d, effective Nov. 1, because of "the lack of experienced personnel and a dearth of investment dollars, which together make it very hard for production."
The November contract for benchmark US light, sweet crudes slipped by 13¢ to $28.16/bbl Friday on the New York Mercantile Exchange. The December contract for benchmark US oil dropped by 16¢ to $27.92/bbl.
Unleaded gasoline for October delivery jumped by 1.15¢ to 88.74¢/gal Friday on NYMEX. Heating oil for the same month climbed by 0.74¢ to 74.85¢/gal.
The October natural gas contract jumped 11.2¢ to $4.43/Mcf Friday on NYMEX "amid a slipping cash market and mostly mild weather forecasts through this week," said analysts Monday at Enerfax Daily.
The National Weather Service calls for below normal temperatures for the eastern half of the US during Oct. 2-6, with seasonal or above seasonal readings expected in the western US for the same period.
In London, the November contract for North Sea Brent oil lost 17¢ to $26.64/bbl Friday on the International Petroleum Exchange. The drop came on profit-related selling after a surge in futures values following OPEC's decision to cut output by 900,000 b/d.
Traders said Friday that the Brent price needed to come down and consolidate before any rally could continue.
However, the October natural gas contract rose by 3.2¢ to the equivalent of $3.18/Mcf Friday on IPE.
The average price for OPEC's basket of seven benchmark crudes decreased by 26¢ to $26.11/bbl Friday. The average price of the basket up to Sept. 25 has averaged $27.87/bbl.
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