Continued worries about increased OPEC production drove down world oil prices Monday, while the unexpected shutdown of a Pennsylvania refinery boosted gasoline futures on the New York Mercantile Exchange as traders shadow-boxed their various fears.
The August contract for unleaded gasoline jumped 2.3� to 94.94�/gal in a knee-jerk reaction to tightening supplies during the peak US driving season.
Meanwhile, Rilwanu Lukman, secretary general of the Organization of Petroleum Exporting Countries, was quoted as reiterating that cartel members are prepared to increase production to help reduce world oil prices, but only after consultation among all members.
That reminder of OPEC's potential power dropped the August contract of the benchmark blend of light sweet crudes by 59� to $29.69/bbl Monday on the NYMEX, wiping out Friday's gain. The September contract also lost 35� to $28.83/bbl. Prices continued to slide in after-hours electronic trading, with those contracts down to $29.36/bbl and $28.65/bbl respectively.
The August contract for home heating oil also lost 0.97� to 77.93�/gal, while the August contract for natural gas was down 3.4� to $4.23/Mcf.
However, in a telephone conference call with financial analysts just before the market opened today, officials with Simmons & Co. International said market fundamentals for both world oil and North American gas remain strong in the face of growing demand over the next few years. Despite a recent $4 drop, oil prices are not going to revert back to the $18-19/bbl level, they said.
They predicted that oil companies are about to ramp up exploration and production spending by 20%, up from the 15% previously predicted, stimulating activity among the oil service companies they follow. That will happen "in the next two months, perhaps the next few weeks," said Simmons officials. They advised analysts that it's now time to buy key service companies' stocks at bargain prices prior to their subsequent rebound.
On the International Petroleum Exchange in London, the August contract for North Sea Brent lost 85� to $28.85/bbl Monday. The natural gas contract was down 1� to the equivalent of $2.86/Mcf.
Crude oil futures were mixed on the Singapore Exchange today. Traders said the industry at large was trying to digest various versions of reports that OPEC might increase production again.
As the day ended, Singapore Brent for August was up by 15� to $28.85/bbl. However, the September Brent position fell by 31� to $28.01/bbl.
