Oil prices fell last week as markets refused to be rattled by another stoppage of Iraqi crude exports. But natural gas prices could reach new heights this week with a resurgence of cold weather, particularly in the key Northwest US market, analysts said Monday.
The American Gas Association this week is expected to report the withdrawal of 85-100 bcf of gas from storage during the week ended last Friday, compared to a withdrawal of 69 bcf during the same period a year ago, said Robert Morris, industry analyst at Salomon Smith Barney Inc. Moreover, he said US temperatures last week were roughly 16% colder than last year and 7.5% lower than the 10-year average.
"Consequently the year-over-year storage deficit should widen to more than 515 bcf, or nearly 18% below last year, as of Dec. 1," Morris reported Monday.
"While temperatures are expected to moderate near-term across the western Lower 48 states, the East will experience below-normal temperatures for the first half of December, thus elevating seasonal heating demand," he said.
Meanwhile, he said, Iraq announced Sunday evening that it would resume exports to fulfill existing contracts through January.
The January contract for benchmark US light, sweet crude plummeted $1.80 to $32.02/bbl Friday on the New York Mercantile Exchange, while the February position fell $1.71to $31.17/bbl. But both improved in after-hours electronic trading Monday to $32.26/bbl and $31.50/bbl, respectively.
The January contract for home heating oil also plunged 5.17� to 97.08�/gal on the NYMEX, with some analysts claiming chances of acute shortages of that fuel because of a severe winter or other unforeseen factors are "very remote." Unleaded gasoline for the same month lost 4.43� to 82.43�/gal.
But the January contract for natural gas climbed 8.4� Friday to $6.67/Mcf on the NYMEX, ending a week of what Morris described as "schizophrenic" volatility as traders knee-jerked to conflicting weather reports.
In London, the January contract for North Sea Brent crude tumbled $1.71 to $30.17/bbl on the International Petroleum Exchange. The January contract for natural gas also lost 4� to the equivalent of $4.65/Mcf on the IPE.
On the Singapore exchange, the January contract for Brent crude fell $1.71 to $30.17/bbl. The February contract lost $1.58 to close at $29.75/bbl.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes also lost $1.09 to $29.30/bbl.
However, OPEC's basket price averaged $30.92/bbl for the week, down from $31.63/bbl the previous week. So far this year, that basket price has averaged $27.88/bbl.
