Sam Fletcher
Senior Writer
HOUSTON, Feb. 10 -- US futures prices for heating oil hit a 23-year high during trading Friday in the face of declining supplies as colder weather fanned demand for both heating oil and natural gas in the Northeast US market.
Heating oil for March delivery settled at $1.10/gal, up 6.86¢ for the day on the New York Mercantile Exchange. Heating oil prices jumped nearly 20%, or 18¢/gal, through last week, and officials at the US Department of Energy are predicting a 52% rise in consumers' bills for heating oil this winter, The Wall Street Journal reported Monday. It said supply shortages in the Northeast US, the world's biggest heating oil market, prompted a request Friday from 1,000 heating-oil dealers for release of supplies from the US stockpile of 2 million bbl of heating oil in New York Harbor and Providence, RI.
However, US officials have been reluctant to release oil or petroleum products from strategic storage prior to an apparently imminent military confrontation with Iraq.
The March natural gas contract jumped 21.5¢ to $6.04/Mcf Friday on NYMEX. "The market opened up and quickly moved higher, dipped back at midmorning on some mild profit-taking, before continuing steadily higher for the rest of the day, hitting $6.065(/Mcf), a new contract high and 24-month spot chart high, late in the session," said analysts Monday at Enerfax Daily "Most months (were) driven to new highs by cold forecasts through this week and a tight physical market that kept the cash prices at a steep premium to the soaring futures market."
The National Weather Service is forecasting below normal temperatures for the Northeast and parts of the Midwest and Southwest through Feb. 16, with seasonal or above seasonal readings expected for the rest of the nation.
"Cold Northeast and Midwest forecasts through most of this week should support prices near-term, particularly with cash still 25(¢/gal) higher than futures. The strength in the cash (market) may be the result of storage operators, now worried about rapidly declining inventories, turning to the spot market to meet incremental heating demand," analysts reported. "While buying could be tempered by a milder outlook for next week, concerns about dwindling stocks and expectations for another supportive storage report (by the Energy Information Agency) next Thursday still favors the bulls."
With heating oil leading the market, the March contract for benchmark US light, sweet crudes soared by 96¢ to $35.12/bbl Friday, with the April position up 92¢ to $34.25/bbl. Unleaded gasoline for March delivery jumped by 3.87¢ to $1.07/gal, as refiners began looking at postponing seasonal turnarounds for gasoline production in order to increase heating oil production.
Robert Morris at Salomon Smith Barney Inc. in New York reported Monday that "war jitters" also pushed spot prices for West Texas Intermediate past $35/bbl last week for the first time since late 2000. "This occurred in the face of an apparent increase in Venezuelan oil output as a nationwide strike ended for all but the nation's oil workers, but as a greater-than-expected drop in US crude oil plus product inventories was reported," Morris said.
Meanwhile, in a weekend radio broadcast from the reactivated El Palito refinery, Venezuelan President Hugo Chávez called over the weekend for criminal prosecution of the 9,000 managers and technicians whom he has fired from the national oil company Petroleos de Venezuela SA (PDVSA) for participating in the strike that has continued 71 days. "I demand jail for the saboteurs; I demand jail for the coup-mongers; I demand jail for the terrorists," he said during his weekly broadcast.
Chávez and his supporters claim that Venezuela's oil production has rebounded to 1.9 million b/d from a record low of 150,000 b/d in December and said "a good amount" of that crude again is being exported. Other sources report Venezuela's production is probably still at only half of its November level of 3 million b/d, with only a small fleet of PDVSA tankers carrying oil exports to US and other markets.
With a large number of PDVSA's previous top employees fired and perhaps facing jail, some observers question whether the company can ever regain its previous position as one of the best-managed oil companies in Latin America.
PDVSA Pres. Alí Rodríguez Araque, who appeared with Chávez on the radio program, said gasoline production from Venezuelan refineries is almost up to the country's consumption level of 200,000 b/d. However, Chávez said Venezuela has spent $600 million to import gasoline from foreign markets during the ongoing strike.
In London, the March contract for North Sea Brent shot up 90¢ to $32.34/bbl on the International Petroleum Exchange. However, the March natural gas contract slipped by 1.8¢ to the equivalent of $2.66/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 48¢ to $31.25/bbl Friday.
For all of last week, OPEC's basket price averaged $30.42/bbl, up 13¢ from the previous week's average. So far this year, that basket price has averaged $30.35/bbl, compared with an average $24.36/bbl for all of 2002.
Meanwhile, Chakib Khelil, Algeria's minister of energy, complained that speculation on international markets is "canceling out" OPEC's attempts to stabilize world oil prices with its latest production increase effective Feb. 1. Current oil supplies are at a satisfactory level to meet market demand, he said, but speculation continues to push up prices.
Contact Sam Fletcher at [email protected]
