MARKET WATCHCrude prices fall as US pressures OPEC to maintain supplies

March 26, 2004
Energy prices plunged Thursday as Energy Sec. Spencer Abraham revealed that US officials are in private talks with some members of the Organization of Petroleum Exporting Countries to get them to set aside the 1 million b/d crude production cutback slated for Apr. 1.

By OGJ editors

HOUSTON, Mar. 26 -- Energy prices plunged Thursday as Energy Sec. Spencer Abraham revealed that US officials are in private talks with some members of the Organization of Petroleum Exporting Countries to get them to set aside the 1 million b/d crude production cutback slated for Apr. 1.

"Discussions have and will be happening," Abraham told reporters. He refused to elaborate.

While some OPEC ministers have indicated their willingness to discuss at their Mar. 31 meeting a possible postponement of the output reduction to which they agreed in February, some have noted that extraneous factors aside from supply and demand have been pushing up crude prices this year. They point to continued political tension in Nigeria, Venezuela, and the Middle East; the low levels of inventories in major consuming states; and speculation in the energy markets.

The May contract for benchmark US light, sweet crudes plunged by $1.50 to $35.51/bbl Thursday on the New York Mercantile Exchange, while the June contract lost $1.49 to $34.80/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., plummeted by $2.05 to $35.53/bbl Thursday.

Gasoline for April delivery fell by 4.15¢ to $1.1049/gal Thursday on NYMEX. Heating oil for the same month was down by 3.17¢ to 88.9¢/gal. The April natural gas contract lost 9.3¢ to $5.34/Mcf, despite a bullish report by the US Energy Information Administration on Thursday that 65 bcf of natural gas were with drawn from underground storage during the week ended Mar. 19.

That was well above the consensus of Wall Street analysts and compared with a withdrawal of 46 bcf the previous week and an injection of 6 bcf during the same period a year ago. US gas storage now stands at 1.03 tcf, up by 372 bcf from year-ago levels but down by 92 bcf from the 5-year average for this time of year.

In London, the May contract for North Sea Brent crude fell by $1.18 to $31.83/bbl Thursday on the International Petroleum Exchange. Gas oil for April delivery retreated by $3 to $282.50/tonne. The April natural gas contract lost 4.6¢ to the equivalent of $3.57/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes declined by 92¢ to $31.93/bbl Thursday.