Market watch: Oil prices decline with economic worries

March 23, 2001
Oil futures prices declined Thursday among fears of an economic slowdown as global stock markets suffered through one of their worst days in recent months. On the New York Mercantile Exchange, the May contract for benchmark US light, sweet crudes dropped 26� to $26.54/bbl.


By the OGJ Online Staff


HOUSTON, Mar. 23�Oil futures prices declined Thursday among fears of an economic slowdown as global stock markets suffered through one of their worst days in recent months.

On the New York Mercantile Exchange, the May contract for benchmark US light, sweet crudes dropped 26� to $26.54/bbl as traders worried that a cooling world economy will reduce demand for oil. The June oil futures contract also lost 15� to $26.71/bbl.

However, the April contract for unleaded gasoline gained 0.73� to 90.96�/gal, following earlier reports by both the US Department of Energy and the American Petroleum Institute of large declines in US gasoline inventories last week. Home heating oil for the same month rose 1.02� to 72.63�/gal.

Last week�s decision by the Organization of Petroleum Exporting Countries to reduce oil production again by 1 million b/d in April proves that its members still can�t judge market forces any better than they did in 1997 or 1981, said William R. Edwards, president of Edwards Energy Consultants, Houston.

In making that decision, OPEC officials cited the historical drop in demand for energy during the second quarter of the year.

�They are right in that product demand falls off during the second quarter. But OPEC doesn�t sell product�it sells crude,� said Edwards, who has previously served as consultant to OPEC members and was in Vienna for that meeting.

US inventories of crude and refined products �have been pulled down practically to working stock levels,� said Edwards. �Seasonal refinery turnarounds are essentially over, so demand for crude should pick up about the time that OPEC is cutting supply.�

That could result in a sharp jump in oil prices within a matter of weeks, he said.

Natural gas for April delivery was up 17.1� to $5.21/Mcf Thursday on the NYMEX. The American Gas Association earlier reported withdrawals of 24 bcf of gas from US underground storage last week, less than expected on Wall Street. Natural gas storage now totals 684 bcf, or 380 bcf below year-ago levels.

Meanwhile, forecasters say there�s a 36% risk of a hurricane or tropical storm forcing a temporary shut-in of some offshore production in the gas-prone US Gulf of Mexico this season. That�s 6% greater than normal, officials said.

In London, the May contract for North Sea Brent crude closed at $24.63/bbl Thursday, down 37� for the day after failing to sustain a move above the key $25/bbl level on the International Petroleum Exchange. The April natural gas contract was up 2� to the equivalent of $3.29/Mcf on the IPE.

On the Singapore exchange, the May contract for Brent crude settled at $24.63/bbl. The June contract settled at $24.91/bbl.

The average price for OPEC�s basket of seven crudes gained 9� to $22.85/bbl Thursday.