MARKET WATCH
NYMEX energy futures prices closed mixed Monday


By OGJ editors
HOUSTON, Oct. 7 -- Energy futures prices closed mixed in trading on the New York Mercantile Exchange Monday. Meanwhile, the US Energy Information Administration issued its annual winter forecast, saying consumers can expect higher natural gas prices.

EIA's outlook called for world oil prices to remain firm through the coming winter of 2003-04, primarily because of the recent decision by the Organization of Petroleum Exporting Countries to lower oil production quotas.

"OPEC's decision to cut its production targets reduces the chances for a large end-of-year stock build that OPEC feared could undermine oil prices. Even before OPEC's decision to lower quotas, EIA had projected that the Organization for Economic Cooperation and Development (OECD) commercial inventory situation would remain tight until the end of the year," EIA said.

"Until these inventories are rebuilt above observed 5-year lows, which is not expected to occur until early 2004, West Texas Intermediate (WTI) crude oil prices should remain relatively high over the 3-6 months, then gradually slide to roughly $27/bbl by late 2004," EIA said.

However, tight oil and gas markets have generated relatively high levels of crude oil and petroleum product prices during much of this year, and gas spot prices are expected to average over $5/Mcf for all of 2003, about 70% above the 2002 average, the forecast said.

Natural gas prices
"Continued increases in residential prices are expected for natural gas, reflecting tightness in supplies for much of 2003 and lagged cost recovery by gas distribution companies in consumer bills," it added. The forecast's projections assume normal weather.

Gas demand is expected to fall by 1.1% in 2003 because high prices discourage demand, particularly in the industrial and electric power sectors. Another factor was lower weather-related demand following the first quarter.

"Accelerated economic growth and generally lower prices are projected to increase consumption in 2004," EIA said.

Futures market prices
The November contract for benchmark US light, sweet crudes gained 7¢ to $30.47/bbl, while the December position advanced by 21¢ to $30.31/bbl.

Unleaded gasoline for November delivery dropped 0.55¢ to 81.24¢/gal. Monday on the New York Mercantile Exchange. On Friday, the November contract jumped to 85.11¢/gal, the highest near-month price level since mid-September, analysts said.

Heating oil for November ended lower, slipping by 0.55¢ to settle at 81.24¢/gal.

The November natural gas contract was up by 13.7¢ to $4.90/Mcf on NYMEX, "driven by cool forecasts next week after a break warm up this week," said analysts Tuesday at Enerfax Daily. "Traders are leery of being short with crude oil over $30/bbl and winter still ahead."

In London, the November contract for North Sea Brent oil increased by 18¢ to $28.89/bbl Monday on the International Petroleum Exchange.

The November natural gas contract gained 3¢ to the equivalent of $4.16/Mcf on IPE. The average price for OPEC's basket of seven benchmark crudes increased by 25¢ to $27.85/bbl Friday. OPEC's average basket price rose by 34¢ to $28.19/bbl.

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