Sam Fletcher
Senior Writer
HOUSTON, Mar. 17 -- Oil futures prices continued to fall Friday as UK and US markets saw President George W. Bush apparently back away from a confrontation with other members of the United Nations Security Council over Iraq.
But oil prices rebounded in Asian markets early Monday after Bush promised "a moment of truth for the world" at a Sunday meeting in the Azores with UK Prime Minister Tony Blair and Spanish Prime Minister José María Aznar. That meeting seemed to signal an end to diplomatic maneuvering and the imminent threat of a US-led attack against Iraq, with or without UN approval. The US, UK, and Germany began moving civilian and diplomatic personnel from the Middle East.
Based on those developments, Matthew Warburton at UBS Warburg LLC, New York, said Monday, "We expect oil prices to remain well-supported over the very near-term," despite possible opportunities for profit-taking this week.
In London, brokers said oil futures prices were likely to rebound on short-covering in case of imminent war, but prices may fall again when war begins, as happened with Desert Storm in 1991.
Friday's prices
The April contract for benchmark US light, sweet crudes lost 63¢ to $35.38/bbl Friday on the New York Mercantile Exchange, while the May position plummeted by $1.31 to $33.36 on reports that Saudi Aramco had chartered at least eight VLCCs to export crude for May delivery into US markets.
In a direct reversal of his previous position, US Sec. of Energy Spencer Abraham also indicated that the US might release oil from its Strategic Petroleum Reserve without consulting officials of the International Energy Agency in Paris.
Home heating oil for April delivery plunged by 2.64¢ to 94.07¢/gal Friday on NYMEX. Unleaded gasoline for the same month fell 1.73¢ to $1.04/gal.
The April natural gas contract gained 6.8¢ to $5.43/Mcf Friday. "The market opened steady but quickly sold off on mild weather forecasts, hitting a low of $5.08(/Mcf) by mid-morning (Friday) before turning around on short-covering and rising for most of the rest of the day. With war looming, few traders wanted to go home short over the weekend," analysts at Enerfax Daily reported Monday.
They advised, "Look for the market to begin range trading in a consolidation move for awhile. With war on the horizon, however, uncertainty and volatility are the rules for the day."
Gas forecast raised
Meanwhile, Raymond James & Associates Inc., St. Petersburg, Fla., on Monday hiked its 2003 natural gas forecast to $6/Mcf, from its previous forecast of $5/Mcf and a Wall Street consensus of $4.40/Mcf. "We believe the fundamentals are in place for several years of sustained higher natural gas prices," said Marshall Adkins, in Raymond James' Houston office.
He noted that many Wall Street analysts suffered vertigo from a similar run-up in natural gas futures prices in 2001, followed shortly by "a slippery decline that persisted until late 2002." However, Adkins said, "The key supply-demand variables that forced gas prices lower in 2001 have been exhausted coming into 2003."
Specifically, he said, the 2001 gas crisis was solved by three factors:
-- A temporary 10 bcfd gas supply spike driven by "gas cap blow-downs."
-- A more permanent 10 bcfd obliteration of "core" US industrial gas consumption.
-- A temporary 5 bfcd fuel-switching phenomenon away from gas and towards alternative fuels that both increased gas supply and reduced demand.
"Today, the situation is very different," Adkins said. "The gas caps have been blown down, the price-sensitive industrial gas consumers have already closed the doors, and there are no alternative fuels available for switching. That means the gas problem will be harder to fix this time."
In London, the April contract for North Sea Brent fell by $1.05 to $31.38/bbl Friday on the International Petroleum Exchange. The April natural gas contract also lost 7.6¢ to the equivalent of $2.79/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes fell by $1.44 to $30.98/bbl Friday.
For the full week, however, the OPEC basket price averaged $32.72/bbl, up 48¢ from the previous week. So far this year, the OPEC basket price has averaged $31.54/bbl, up from $24.36/bbl during all of 2002.
Contact Sam Fletcher at [email protected]
