HOUSTON, May 10 -- Near-month crude futures prices briefly hit $40/bbl Friday for the first time in 10 1/2 years on the New York Mercantile Exchange as traders bought out of fear of being caught short over the weekend by potential terrorist attacks on Middle East production and export facilities.
That happened despite intelligence reports among Western governments of "no credible specific threat" against those facilities, analysts said. However, they said, traders apparently fear that recent threats to foreign nationals in Saudi Arabia could spread to foreign workers throughout the Middle East.
The June contract for benchmark US light, sweet crudes closed at $39.93/bbl Friday on NYMEX, up by 56¢ for the day after trading at $39.37-40/bbl. The July position advanced 54¢ to $39.71/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 55¢ to $39.93/bbl Friday.
"WTI spot crude oil prices touched $40/bbl several times last week," said Robert S. Morris, Banc of America Securities LLC, New York, in a Monday report. "At this stage, technical factors in the NYMEX futures contract appear to have gained the upper hand for the moment, which could drive prices to break through $40/bbl this week. The all-time high for the front-month NYMEX oil contract is $40.42[/bbl]a tempting target for the technical traders," he said.
Claude Mandil, executive director of the Paris-based International Energy Agency, called Friday for the Organization of Petroleum Exporting Countries to take action to curb soaring oil prices. "Those who can do something should," he told Dow Jones Newswires in a telephone interview. Although OPEC is producing well above its current quota of 23.5 million b/d, the market still believes the cartel is limiting supply, Mandil said.
Most OPEC officials, however, attribute current high energy prices to a variety of factors outside of the group's control, including geopolitical tensions, speculation in the futures markets, stringent US requirements for reformulated gasoline, and US specifications on imported gasoline.
Chakib Khelil, Algerian's energy minister, and Abdullah bin Hamad Al Attiya, his Qatari peer, said last week that an increase in OPEC's production would do little to lower US wholesale gasoline prices at the pump. Hugo Chavéz, Venezuela's leftist president, blamed the foreign policies of US President George W. Bush, particularly the US-led war in Iraq, for pushing energy prices to historic levels.
However, Obaid bin Saif Al-Nasseri, UAE minister of petroleum, said, "A reading of the events and the prices says that OPEC must do something."
Meanwhile, the June gasoline contract continued its climb to record high prices each day last week, up by 2.66¢ to $1.3386/gal Friday on NYMEX. Heating oil for June delivery increased by 1.19¢ to $1.0164/gal. Natural gas for the same month was up by 7.5¢ to $6.29/Mcf.
"Warm late-week weather forecasts, particularly for Texas and the South, and firm crude oil prices helped underpin natural gas last week, despite a huge storage surplus compared [with] last year," said analysts Monday at Enerfax Daily.
Moreover, reports from 38 of the 40 largest publicly traded US natural gas producers "indicate US natural gas production in the first quarter dropped 5.5% year-over-year and nearly 1% sequentially," said Morris.
In London, the June contract for North Sea Brent crude gained 47¢ to $37/bbl Friday on the International Petroleum Exchange. Gas oil for June delivery dipped by 25¢ to $317.25/tonne. The June natural gas contract increased by 2.5¢ to the equivalent of $3.72/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes climbed by 24¢ to $36.12/bbl Friday.
Contact Sam Fletcher at Samf@ogjonline.com.