By the OGJ Online Staff
HOUSTON, July 26 -- US energy futures prices jumped Wednesday in instant reaction to a surprise announcement that the Organization of Petroleum Exporting Countries will reduce its oil production by 1 million b/d effective Sept. 1.
Traders expected OPEC members to take such action at a special meeting in early August and had already factored such a reduction into next month's prices, analysts said. But in an unprecedented move, OPEC ministers decided on a production cut through a flurry of telephone conferences this week, foregoing their usual face-to-face meeting (OGJ Online, July 25, 2001).
Such quick action to stop the market's recent downward spiral emphasizes OPEC's determination to keep oil prices within its targeted range of $22-$28/bbl, analysts said.
OPEC's decision triggered a futures market rally on the New York Mercantile Exchange that boosted the September contract for benchmark US light, sweet crudes by 53¢ to $26.84/bbl, while the October contract rose 52¢ to $26.42/bbl.
Unleaded gasoline for the August delivery jumped 3.05¢ to 75.1¢/gal, and home heating oil for the same month rose 2.1¢ to 70.87/gal. The August contract for natural gas surged 30.6¢ to $3.28/Mcf on the NYMEX.
In London, futures prices for North Sea Brent crude improved but were little changed from midday levels on the International Petroleum Exchange. Some brokers and analysts of that market expressed doubt that OPEC's third production cut this year will be sufficient to keep prices within its target range.
The September contract closed at $25.25/bbl, up 35¢ for the day after trading in a range of $24.95-$25.45. The August natural gas contract dropped 6.4¢ to the equivalent of $2.76/Mcf on the IPE.
OPEC's average price for its basket of seven crudes gained 32¢ to $23.78/bbl Wednesday.
