Sam Fletcher
Senior Writer
HOUSTON, Mar. 16 -- Energy futures prices soared Monday with new indications that members of the Organization of Petroleum Exporting Countries plan to follow through with their agreed production cut of 1 million b/d effective Apr. 1.
Some observers have been hoping that, in light of the recent flyup in crude prices, affected OPEC members would set aside the quota reduction to which they agreed in February.
Energy prices also were buoyed by predictions of an unexpected and untimely cold wave in the Northeast US over the next few days. Markets also were uneasy over emerging evidence connecting Al-Qaeda terrorist group to suspects in the recent train bombings that killed 200 people in Madrid. Some are claiming it is the first instance of Islamic jihad attacks in the European Union.
Meanwhile, Obaid bin Saif Al-Nasseri, UAE energy minister, told reporters Monday he knows of no plan to raise OPEC's target price band above $22-28/bbl, although the price for the cartel's basket of seven benchmark crudes has averaged well above that level so far this year. OPEC's basket price gained 36¢ to $32.30/bbl Monday.
Energy prices increase
Heating oil for April delivery jumped by 3.8¢ to 91.69¢/gal Monday on the New York Mercantile Exchange, pushing up other energy commodities in the process, analysts reported. That was the biggest intraday gain in a front-month heating oil contract since Feb. 20, sources reported. Gasoline for the same month escalated by 3.46¢ to $1.1319/gal on NYMEX.
The April contract for benchmark US light, sweet crudes shot up by $1.25 to $37.44/bbl Monday on NYMEX, the highest price for a near-month crude contract since Mar. 12, 2003, just before the invasion of Iraq by the US-led coalition. The May contract gained $1.13 to $36.70/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by 75¢ to $36.93/bbl.
The April natural gas contract increased by 12.2¢ to $5.72/Mcf Monday on NYMEX, "driven by a strong rally in oil futures and a firmer cash [spot gas] market in the face of cooler Northeast and Midwest weather this week," said analysts Tuesday at Enerfax Daily. "The crude oil rally kept natural gas sellers nervous, and the weather also looks a little cooler this week," they said.
Meanwhile, UBS Securities LLC, New York, raised its composite spot natural gas price forecast for 2004 to $4.90/Mcf from $4.50/Mcf previously and to $4.50/Mcf from $4/Mcf for 2005. "The last time we adjusted our 2004 natural gas price forecast was in June 2003 when we raised our 2004-05 projections amid overall supportive fundamentals and a robust price environment. Today, we find ourselves in a similar situation, with current prices higher than our original expectations," explained UBS analyst Ronald J. Barone.
Other factors driving up natural gas prices, he said, include: continued declines in net deliverability of North American gas; limited flexibility to increase Canadian gas imports; increased exports of US gas to Mexico; high crude prices; increased demand from the power generation sector; and an improving global economy that will further limit destruction of domestic industrial demand.
In London, the April contract for North Sea Brent oil shot up by $1.56 to $33.80/bbl in late afternoon trading on the International Petroleum Exchange. Brent futures will have to retreat at some point for traders to take profits from this rally, brokers said, but the market is so bullish that prices are likely to remain near current levels for the near-term.
Gas oil for April delivery gained $16 to $281.75/tonne. The April natural gas contract increased by 5.2¢ to the equivalent of $3.66/Mcf Monday on IPE.
Contact Sam Fletcher at [email protected]
