By the OGJ Online Staff
HOUSTON, May 31 -- A sell-off of the June gasoline contract prior to expiration helped dampen oil prices Wednesday on the New York Mercantile Exchange.
Unleaded gasoline for June 1 delivery dropped 3.46¢ to $1.0412/gal, continuing a selling spree that started last week.
Analysts expect the sell-off to continue Thursday, the last trading day for that contract. Traders apparently are concerned that gasoline is overpriced in light of basic market fundamentals of supply and demand.
After the close of trade Wednesday, the American Petroleum Institute reported US gasoline stocks increased by 1.6 million bbl last week to nearly 206.2 million bbl. API also reported US crude inventories declined by 3.98 million bbl to nearly 322 million bbl total.
Still, the July contract for benchmark US light, sweet crudes slipped by 11¢ to $28.55/bbl, while the August contract lost 13¢ to $28.69/bbl. Both contracts continued declining in after-hours electronic trading to $28.35/bbl and $28.53/bbl, respectively.
Oil futures prices had increased recently as Iraq renewed its threat to halt unsupervised crude sales if the UN Security Council adopts the joint "smart sanctions" proposal by the US and UK. Iraq has been exporting about 2.1 million b/d under the UN oil-for-food program.
However, Saudi Arabia has said it and other members of the Organization of Petroleum Exporting Countries will step in to fill any serious supply disruptions if Iraq reduces its exports.
The June contract for home heating oil inched up 0.13¢ to 77.6¢/gal Wednesday on the NYMEX. Natural gas for July delivery also jumped 24¢ to $3.98/Mcf.
US natural gas storage now totals 1.28 tcf, or 7 bcf more than last year at this same time. That strong buildup of US gas reserves during the first 8 weeks of the traditional injection season has helped push natural gas prices below year-ago levels for the first time since July 1999.
"Movement in both the physical and futures natural gas markets appear to indicate that this trend is likely to continue for the foreseeable future," said Robert Morris, energy analyst at Salomon Smith Barney Inc., in his weekly exploration and production report Wednesday.
In London, North Sea Brent crude futures were virtually unchanged in subdued trading on the International Petroleum Exchange. The July Brent contract dipped 3¢ to $29.14/bbl. However, analysts said the Brent futures market appears fairly stable above the $29/bbl mark.
The June natural gas contract gained 2.8¢ to the equivalent of $2.99/Mcf on the IPE.
The average price for OPEC's basket of seven crudes increased by 15¢ to $27.05/bbl.
Chakib Khelil, Algeria's energy minister and OPEC conference president, Wednesday dismissed the need to increase production at the group's June 5 conference. "Stockpiles of crude are at okay levels and the (supply) problem is with refining capacity and not with crude supplies," he told reporters at the end of a 3-day visit to Iraq.
In a separate statement, Kuwaiti Oil Minister Adel K. Al-Sabeeh said he also is satisfied with the current level of international oil prices.
