Sam Fletcher
Senior Writer
HOUSTON, Mar. 4 -- Energy futures prices declined Monday as Iraqi President Saddam Hussein apparently bought more time against an US-led invasion through his 11th hour move to destroy some al-Samoud missiles since Saturday, the deadline set by United Nations inspectors.
However, some analysts said the market's decline may be "too much, too soon," with traders anticipating too much from the delay theories.
"There are all types of predictions for what may occur in world oil markets in the next 40 days, with both wartime and peace scenarios suggesting that crude oil could trade anywhere from $15/bbl lower to $20/bbl higher before spring is over," Oil Price Information Service (OPIS), Lakewood, N.J., reported Monday. It noted, "Crude oil ended February at $36.60/bbl, its highest level since Oct. 19."
Although the shortest month of the year, February racked up some record price increases through a combination of war worries, Venezuela's strike, the first sustained cold winter of the decade, and low US inventories of oil and petroleum products, OPIS officials said.
As a result, they said, "Consumers and end-users may pay 30-35¢/gal more for some oil products than they did about 30 days ago." They said nationwide average retail prices for gasoline could "soon surpass $1.70/gal," while retail diesel prices "could approach $1.85-1.90/gal" before mid-March.
"Wholesale prices have calmed in recent weeks, but there are fears that new pricing updrafts will come as US suppliers make their switch from winter to springtime blends," OPIS reported. That switch already is in progress in California, where wholesale prices increased more than 32¢/gal during February, pushing some California pump prices "well above $2/gal," it said.
Meanwhile, officials of the Organization of Petroleum Exporting Countries are permitting other members to maximize production to offset the decline in Venezuela's oil output as a result of the general strike aimed at ousting President Hugo Chávez, said Chakib Khelil, Algeria's energy minister.
However, the chairman and managing director of the Kuwait Oil Co. said Monday that all of Kuwait's northern oil fields would be shut down to protect workers if war breaks out in Iraq. Al Abdali and Al Ratqa fields have already been shut in because of their proximity to the Iraqi border (OGJ Online, Feb. 20, 2003).
Kuwait's western production area, where the 300,000 b/d capacity al Manakeesh oil field is located, also might be closed if circumstances require, officials said.
The April contact for benchmark US light, sweet crudes dropped 72¢ to $35.88/bbl Monday on the New York Mercantile Exchange, while the May contract lost 59¢ to $34.24/bbl. Heating oil for April delivery plunged by 3.61¢ to $1.04/gal. Unleaded gasoline for the same month fell 0.97¢ to $1.09/gal.
The April natural gas contract plummeted 93.9¢ to $7.16/Mcf Monday on NYMEX. The price "fell hard on (a) thin volume" of trading, pressured by weak oil prices and a soft physical market amid milder weather forecasts for the Northeast and Midwest US later this week, said analysts Tuesday at Enerfax Daily. "Volatility is going to continue to be the order of the day for quite some time," they predicted.
In London, the April contract for North Sea Brent oil lost 31¢ to $32.48/bbl Monday in profit taking on the International Petroleum Exchange. The market needed a "meaningful downward correction" in order for "a more substantial price recovery to take place," brokers said.
They see "amble justification" for a price rebound, with the US still vulnerable to supply disruptions as a result of its low inventories of oil and petroleum products.
The April natural gas contract gained 6.8¢ to the equivalent of $2.77/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes dropped $1 to $31.63/bbl Monday.
Contact Sam Fletcher at [email protected]
