Sam Fletcher
Senior Writer
HOUSTON, June 17 -- Energy prices continued to climb, sparked by a June 16 rally of gasoline futures in the New York market.
Still, US Energy Sec. Samuel Bodman said members of the Organization of Petroleum Exporting Countries were "responsible and responsive" in raising the group's production quota by 500,000 b/d to 28 million b/d effective July 1. Oil markets dismissed that move as merely symbolic, however, since it only raises OPEC's quota to its present level of overproduction without adding any new crude supplies.
After meeting June 16 in Oslo, Mexico's Secretary of Energy Fernando Elizondo Barragan and Norwegian Oil Minister Thorhild Widvey said their countries have no spare production capacity and there is nothing they can do to help ease crude oil prices.
Meanwhile in the futures market, the July crude contract and calendar 2010 crude were recently trading at the same level of $55/bbl, said Amanda Lee, an analyst in the New York office of Deutsche Bank AG, in the bank's June 17 Commodities Weekly report. "Crude oil is therefore trading as if it is a financial asset rather than a commodity, as record high prices at the back end have pushed this part of the curve into contango and hence further away from mean reverting levels," she said. "Robust demand growth, disappointing non-OPEC supply, limited spare production capacity, and heavily stretched refining capacity are cited for stronger oil prices. However, it appears unrealistic to expect these forces to persist for the next 5 years to justify crude oil above $55/bbl."
Energy prices
The July contract for benchmark US light, sweet crudes shot up by $1.01 to $56.58/bbl June 16 on the New York Mercantile Exchange, with the August contract escalating by $1.02 to $57.43/bbl. Gasoline for July delivery jumped by 3.53¢ to $1.60/gal on NYMEX. Heating oil for the same month inched up by 0.44¢ to $1.63/gal.
The July natural gas contract climbed by 17.2¢ to $7.61/MMbtu on NYMEX after the Energy Information Administration reported an expectedly small injection of 73 bcf of gas into US underground storage in the week ended June 10. "There was an upward bias [in the natural gas futures market] before the EIA number came out, but a speculative flurry of buying after it was released," said analysts at Enerfax Daily.
In London, the new front-month August contract for North Sea Brent crude gained 98¢ to $56.22/bbl on the International Petroleum Exchange.
The average price for OPEC's new basket of 11 benchmark crudes was up by 15¢ to $50.18/bbl on June 16.
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