HOUSTON, Dec.7 -- After plummeting more than $7/bbl last week, crude futures prices bumped up Monday amid indications by several members of the Organization of Petroleum Exporting Countries that they might take action at their meeting Friday in Cairo to curb that fall.
Markets also reacted to an attack by an al-Qaeda group on the US consulate in Jeddah that killed five non-American employees. Three terrorists died and two were captured in a gunfight with Saudi Arabian security forces. One of the captives later died.
Meanwhile, representatives from Royal Dutch/Shell Group's Nigerian unit and the Nigerian government are scheduled to meet Wednesday with representatives of the Kula community after hundreds of those citizens occupied two Shell oil flow-station platforms in the Rivers State over the weekend. That action reportedly has shut in 70,000 b/d of crude production. Local residents also occupied a flow station operated by ChevronTexaco Corp. that shut in as much as 40,000 b/d of production, according to reports. Those takeovers reportedly were triggered by job disputes. Nigeria has been plagued with various strikes and incidents this year that have temporarily disrupted crude production and exports.
The latest separate incidents in Saudi Arabia and Nigeria "have yet again demonstrated the source of the geopolitical risk premium being factored into oil prices," said analysts Tuesday at the Houston office of Raymond James & Associates Inc. The daytime attack
Monday on the US consulate "bears a strong resemblance to attacks earlier this year on Western residential compounds in several Saudi cities," the analysts said. "While this particular attack did not target oil industry workers specifically, it nonetheless shows the uncertain security in the Saudi kingdom."
However, other analysts credited Monday's uptick in energy prices primarily to growing expectations that OPEC members will at least agree to curb overproduction or perhaps even roll back their official production quota of 27 million b/d, depending on how strong a message the group wants to send to oil markets. Total production from OPEC, including Iraq, was recently estimated at 29.5 million b/d (OGJ Online, Nov. 30, 2004.)
Venezuela has called for production cuts. Iran, Kuwait, Libya, and Qatar have expressed concern over the recent rapid fall in oil prices. Even Saudi Arabia has said all options would be considered at this week's meeting. "We think instead of cutting quotas, OPEC should ask members to produce oil according to their respective quotas," said Iin Arifin Takhyan, Indonesia's director general of oil and gas.
OPEC Conference President Purnomo Yusgiantoro said Tuesday that ministers will discuss raising the target price band of $22-28/bbl that the group instituted in March 2000. Crude has been selling at prices above that band for more than a year now.
"Our position on the price band is to adjust it with the inflation that occurred since 2001 until now and the depreciation of the dollar," Purnomo told a press conference in Jakarta.
The January contract for benchmark US sweet, light crudes bobbled up by 44¢ to $42.98/bbl Monday on the New York Mercantile Exchange. The February contract gained 49¢ to $43.24/bbl. On the US spot market, West Texas Intermediate gained 44¢ to $42.99/bbl. Heating oil for January delivery increased by 1.38¢ to $1.25/gal Monday on NYMEX, but gasoline for the same month dipped by 0.53¢ to $1.1296/gal. The January natural gas contract jumped by 12.7¢ to $6.92/MMbtu Monday, "driven by firmer crude oil prices, short-covering [by traders with open sales contracts] after last week's steep slide, and colder forecasts for next week despite mild Northeast and Midwest weather this week," said analysts Tuesday at Enerfax Daily.
In London, the January contract for North Sea Brent crude increased by 29¢ to $39.65/bbl on the International Petroleum Exchange.
The average price for OPEC's basket of seven benchmark crudes was up by 36¢ to $34.89/bbl Monday.
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