MARKET WATCHNYMEX energy futures prices fall in profit taking

May 7, 2003
Energy futures prices fell Tuesday on the New York Mercantile Exchange as profit takers generally rolled back the previous day's rally in expectation of a report Wednesday of another large build in US inventories of oil and petroleum products.

By OGJ editors
HOUSTON, May 7 -- Energy futures prices fell Tuesday on the New York Mercantile Exchange as profit takers generally rolled back the previous day's rally in expectation of a report Wednesday of another large build in US inventories of oil and petroleum products.

The June contact for benchmark US light, sweet crudes fell 77¢ to $25.72/bbl Tuesday on NYMEX, while the July position retreated 68¢ to $25.62/bbl. Heating oil for June delivery dropped 2.73¢ to 67.78¢/gal. Unleaded gasoline for the same month was down 2.35¢ to 76.85¢/gal.

Even the June natural gas contract lost 12.1¢ to $5.57/Mcf on NYMEX. Analysts at Enerfax Daily said Wednesday that traders in that market also grabbed profits ahead of the next government report Thursday of US gas storage.

Gas market activity
"The bulk of the selling came from profit taking, as marketers covered up and took profit while they could. Funds were also reported to be selling," Enerfax reported. "Expect more range-bound trading as the market nears Thursday's storage report. Look for the market to stay inside a $5.45-$5.62(/Mcf) range for a while."

Enerfax said, "A smaller than the expected injection could ignite a rally. Any sort of bullish threat could send this market flying. For now, nervousness in the market tends to make people overreact, exaggerating the run-up."

Meanwhile, analysts said, "Traders maintain that prices were likely to be underpinned by forecasts for warmer weather next week and the possibility of extended repair outages at nuclear power plants in Florida and South Carolina, which together are capable of generating about 1,700 Mw. The National Weather Service outlook for May 12-16 calls for above-normal temperatures through the Mid-Atlantic down through the Southeast reaching east across Texas and New Mexico, with normal to below-normal temperatures through the West, the Plains region, the Midwest, and the Northeast."

London prices
In London, futures prices for North Sea Brent oil were little changed as trading resumed at the International Petroleum Exchange, which was closed Monday because of a public holiday. The June Brent contract closed at $23.57/bbl, up 5¢ for the day after trading in a range of $23.45-24.29/bbl Tuesday.

London brokers said recent gains in crude futures prices in that market appear unsustainable in the face of expected supply increases during the summer months. They said traders generally anticipate a build of 2 million bbl in US crude inventories; if the increase is more than that, they said, prices are likely to fall to $23/bbl.

The June natural gas contract gained 6.7¢ to the equivalent of $2.61/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dipped by 7¢ to $23.92/bbl Tuesday.