By OGJ editors
HOUSTON, Nov. 20 -- Crude oil and refined products futures prices fell on the New York Mercantile Exchange Tuesday in a correction to Monday's price surge, which had been triggered by traders' renewed jitteriness about the possibility of war in the Middle East.
Analysts said Tuesday's correction stemmed from lack of any fresh news regarding whether Iraq actually will cooperate with United Nations weapons inspections as promised.
Last week, Iraq accepted the UN Security Council's new resolution calling for the return of weapons inspectors to check for any production of weapons of mass destruction.
A lead team of UN inspectors arrived in Iraq Monday to prepare for the Dec. 23 initiation of the inspection program (OGJ Online, Nov. 18, 2002). Meanwhile, US President George W. Bush's administration repeated its skepticism about Iraq's sincerity regarding full compliance with the UN resolution.
Natural gas futures prices held above the $4/Mcf for the second consecutive day Tuesday, with the December contract dipping by 0.2¢ to hold steady at $4.26/Mcf on NYMEX.
Traders' expectations of an increase of 1 million bbl in US gasoline stocks in weekly inventory data contributed to dropping prices for refined products late Tuesday.
Heating oil for December delivery slipped by 0.11¢ to 72.17¢/gal. Unleaded gasoline for December delivery dropped 1.78¢ to 70.16¢/gal.
The December contract for benchmark US sweet, light crudes slipped by 29¢ to $26.42/bbl Monday on NYMEX, while the January position dropped 30¢ to $25.50/bbl.
Traders are watching for proof that the Organization of Petroleum Exporting Countries will cut back on production at its next meeting following earlier comments to that effect from OPEC officials.
"At this juncture, oil prices are increasingly being driven by traders' perceptions regarding OPEC's ability to rein in output during (the first half of 2003) and changes in the political risk premium, reflecting the return of UN weapons inspectors in Iraq, aggressive US rhetoric, and geopolitical tensions elsewhere," said analyst Matthew Warburton with UBS Warburg LLC, New York.
"Nonetheless, with modest draws across crude and all main products and total domestic inventories remaining close (to) their 5-year nadir (675.9 million bbl), we expect this week's API report to be supportive for oil prices," he added in a research note.
The American Petroleum Institute late Tuesday reported that US crude stocks fell by 189,000 bbl to 283.8 million bbl in the week ended Nov. 15—providing the Wednesday market with little direction.
In London, futures prices for North Sea Brent oil fell on the International Petroleum Exchange, with the January position losing 20¢ to $24.08/bbl. The December natural gas contract lost 4¢ to the equivalent of $3.54/Mcf on IPE.
The average price for the OPEC basket of seven benchmark crudes regained 32¢ to $24.05/bbl Monday.