By OGJ editors
HOUSTON, Apr.10 -- Energy futures prices fell Tuesday as Israeli troops withdrew from some of the disputed Palestinian territories and Saudi Arabia pledged to make up any shortfall from Iraq's embargo of oil exports.
Analysts saw the Saudi offer as a signal that there is virtually no risk that other Islamic oil-producing countries would join Iraq's oil embargo in response to the turmoil in the Middle East.
Both the May and June contracts for benchmark US sweet, light crudes dropped 72¢ to $25.82/bbl and $26.03/bbl, respectively, on the New York Mercantile Exchange. Both continued declining to $25.77/bbl and $25.95/bbl, respectively, in after-hours electronic trading, following a bearish report of US petroleum inventories by the American Petroleum Institute.
US oil stocks increased by 4.3 million bbl last week, while distillate inventories were up 1.1 million bbl. US gasoline inventories registered a modest decline of 10,000 bbl, said API officials. Analysts predicted further price declines Wednesday as a result of that report.
Heating oil for May delivery fell 1.5¢ to 67.8¢/gal during the regular NYMEX trading session Tuesday. Unleaded gasoline for the same month slipped 0.8¢ to 83.39¢/gal. The May natural gas contract also lost 12.6¢ to $3.20/Mcf.
Despite commodity price increases this year, the average composite natural gas spot price of $2.39/MMbtu during first quarter 2002 was roughly 60% below the near-record level of $6.22/MMbtu during the same period last year, said Robert Morris at Salomon Smith Barney Inc. Spot prices for benchmark US crudes averaged $21.57/bbl during the latest quarter, nearly 25% below the year-ago average of $28.57/bbl.
As a result, Morris said, exploration and production companies are expected to post significantly lower first-quarter earnings, with cash flow per share projected to be down more than 50% from a year ago. Low commodity prices are expected to outweigh production increases of 12% for natural gas and 8% for oil.
Those production increases are largely the result of acquisitions. So total production during the first quarter is expected to remain "essentially flat," Morris said.
In London, the May contract for North Sea Brent crude broke through support at $26.50/bbl in early afternoon trading Tuesday, triggering additional technical selling on the International Petroleum Exchange. It closed at $26.08/bbl, down 94¢ for the day to just above the next key support level of $26/bbl. Brokers said prices are expected to stabilize between $26-$26.50/bbl in that market.
The May natural gas contract also lost 3.5¢ to the equivalent of $1.85/Mcf on the IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes fell 88¢ to $24.25/bbl Tuesday.
