MARKET WATCH
Crude oil futures prices retreat

Paula Dittrick
Senior Staff Writer
HOUSTON, June 29 -- Crude oil futures retreated by more than $2/bbl on New York and London markets on June 28, and refined products futures prices also dropped in New York.

It was the biggest drop in crude oil futures prices in weeks. Noting uncertainty in the market's near-term direction, most traders and analysts said they doubted that the drop in crude oil prices would last very long.

Banc of America Securities LCC analyst Daniel L. Barcelo said that his firm raised its 2005 futures crude oil estimate to $54/bbl from $50/bbl, the 2006 estimate to $50 from $40, the 2007 assumption to $40 from $35, and the 2008 assumption to $35 from $32. Those are average price forecasts for the year for West Texas Intermediate on the New York Mercantile Exchange.

"We expect oil prices to trend well above mid-cycle conditions. On the supply side, OPEC [the Organization of Petroleum Exporting Countries] is haunted by the ghosts of the 1980s energy crisis and is only now expanding productive spare capacity, albeit slowly," Barcelo said. "Non-OPEC, in the form of the private sector, continues to exhibit capital discipline, choosing buybacks and dividends over higher capital expenditure."

Meanwhile, the US Energy Information Administration reported June 29 that commercial US crude inventories rose by 1.1 million bbl to 328.5 million bbl during the week ended June 24. Gasoline stocks increased by 300,000 bbl to 216.2 million bbl, while distillate fuel inventories gained 1.7 million bbl to 113.2 million bbl during the same period. Almost all the increase was seen in heating oil inventories, and diesel inventories held fairly steady, EIA said.

US crude oil imports averaged nearly 11 million b/d for the week ended June 24, up 794,000 b/d from the week ended June 17 to 10.97 million bbl. EIA noted the June 24 numbers were the second highest weekly average of US crude oil imports.

Crude input into US refineries for the week ended June 24 increased by 315,000 b/d to 16.3 million b/d with refineries operating at 96.3% of capacity, said EIA.

Energy prices
The August contract for benchmark US light, sweet crudes closed on June 28 down by $2.34 to $58.20. The September contract decreased by $2.22 to $59.11/bbl. On the US spot market, West Texas Intermediate dropped by $2.34 to $58.20/bbl.

Refined products also saw lower prices on June 28. Heating oil for July delivery declined by 5.57¢ to $1.6204/gal on NYMEX. Gasoline for the same month dropped 5.02¢ at $1.6248/gal.

The July natural gas contract lost 16.2¢ to $6.976/MMbtu June 28 on NYMEX.

Enerfax Daily analysts said natural gas futures for July delivery were undermined by moderating weather, particularly in the Northeast, as well as a weak NYMEX cash market, and the sudden decline in crude oil futures prices.

In London, the August contract for North Sea Brent crude dropped by $2.12 to $57.18/bbl on the International Petroleum Exchange.

The average price for the Organization of Petroleum Exporting Countries' new basket of 11 benchmark crudes decreased by 44¢ to $53.82/bbl.
Contact Paula Dittrick at paulad@ogjonline.com

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