By OGJ editors
HOUSTON, Nov. 24 -- Energy prices continued to slip Friday, despite terrorist attacks in Turkey and Iraq earlier in the week and mixed reports of a sharp increase in US crude inventories but declines in petroleum product stocks.
"Meanwhile, natural gas prices could garner some support his week from a major cold front that is now moving eastward across the US," said Robert S. Morris, Banc of America Securities LLC, New York, in a report issued Monday. However, he noted, US demand for energy "typically eases" during the Thanksgiving holiday period, which culminates Thursday.
Chakib Khelil, Algeria's oil minister, the recent rally in world oil prices primarily was caused by political uncertainties in the Middle East and did not reflect market fundamentals of supply and demand.
The second quarter of 2004 will be a problem time for the oil market, he said, when demand is expected to fall by as much as 2 million b/d at a time when producers outside of the Organization of Petroleum Exporting Countries are likely to have increased production by 1 million b/d. Unless oil supplies and demand can be brought into closer balance by then, said Khelil, prices automatically would fall.
Energy prices
The January contract for benchmark US light, sweet crudes lost 25¢ to $32.61/bbl Friday on the New York Mercantile Exchange, while the February contract declined by 21¢ to $31.21/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., plunged by 80¢ to $32.08/bbl Friday after hitting a 9-month high earlier in the week when traders were worried about refineries and product pipeline problems.
Heating oil for December delivery lost 0.55¢ to 86.86¢/gal Friday on NYMEX. Unleaded gasoline for the same month was down by 0.16¢ to 87.92¢/gal. However, the December natural gas contract inched up by 1.6¢ to $4.64/Mcf Friday, "lifted by some pre-weekend short covering [purchasing contracts to offset open sales positions] ahead of a colder Midwest forecast," said analysts Monday and Enerfax Daily.
The December gas contract will expire Tuesday. "Traders, citing the large net short position of [speculative] funds, said the market is still vulnerable to short-covering rallies, particularly if forecasts turn colder," Enerfax analysts said.
In London, the January contract for North Sea Brent oil declined by 20¢ to $29.36/bbl Friday on the International Petroleum Exchange. Gas oil for December delivery lost $4.75 to $262.50/tonne. And the December natural gas contract plunged by 11.1¢ to the equivalent of $5.34/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes dipped by 4¢ to $29.41/bbl Friday, still above the group's targeted price of $22-28/bbl. For all of last week, however, OPEC's basket price averaged $29.31/bbl, up by 71¢ from the previous week's average. So far this year, the OPEC basket has averaged $27.94/bbl.
