Oil prices dropped Monday, with traders still torn between growing demand and fear of an imminent increase in supplies.
The July contract for the benchmark blend of light, sweet crudes closed at $31.69/bbl, down 64� for the day after falling as much as $1.43/bbl at one point on the New York Mercantile Exchange (NYMEX).
That may just be a respite following a $2/bbl surge in that contract last week. Observers reported some profit-taking by traders after that 7% increase.
There is still speculation that OPEC members may decide to increase their production this week, although conventional wisdom says a production hike is more likely later this year. Oil ministers from OPEC member countries will meet in Vienna on Wednesday.
Meanwhile, Norway's oil company association threatened Monday to lock out more than 2,600 unionized offshore oilfield workers in an ongoing labor conflict over retirement ages. Association officials said the lockout would shut down offshore fields at midnight Friday unless the dispute is settled.
That would effectively knock out Norway's production of roughly 3.2 million b/d, which makes it the world's second biggest oil exporter behind Saudi Arabia. Norway is not a member of OPEC but has worked with the cartel in the past to regulate production.
The labor dispute began June 10 when 183 members of the Norwegian Federation of Oil Unions and an affiliate went on strike, shutting down one North Sea field that produces 225,000 b/d.
Meanwhile, the July contract for heating oil dipped to 73.47�/gal, down from Friday's close of 74.12�/gal. Reformulated gasoline also was down to $1.1414/gal from $1.158/gal Friday.
Although several top US officials are calling for investigations into possible price gouging in the wake of higher pump prices, industry observers report US refineries are working at 95% capacity, churning out gasoline to supply the peak summer driving season.
Other sources note that federal officials do not plan to ease the Environmental Protection Agency's mandate for reformulated gasoline in key pollution areas. That might confirm the administration's role in pushing up gasoline prices, observers report.
Natural gas futures also dipped to $4.38/Mcf on Monday, down 7�.
In London on the International Petroleum Exchange (IPE), crude oil futures crept up slightly in early afternoon trading, as the market paused to wait for OPEC's decision on third quarter output levels. Brokers said most of the stale long positions have been shaken out of the market now and Brent appeared to have stabilize.
Traders said prices were likely to remain in a fairly narrow range on either side of the $28/bbl mark until the OPEC meeting was finished.
But the brokers warned that an expectation of an increase of 500,000 b/d in the OPEC ceiling had already been factored into prices.
Today, IPE August Brent crude futures were being traded at $28.04/bbl, up by 6� from the previous close.
Also on the IPE, the July natural gas contract was basically flat at the equivalent of $2.44, down .003�.
