MARKET WATCHDemand growth and terrorist attacks boost energy prices

March 12, 2004
Energy futures prices shot up Thursday as the International Energy Agency raised its estimate of global oil demand growth by 220,000 b/d to 1.65 million b/d this year, based on surging demand in China and other Asian countries outside of the Organization for Economic Cooperation and Development.

Sam Fletcher
Senior Writer

HOUSTON, Mar. 12 -- Energy futures prices shot up Thursday as the International Energy Agency raised its estimate of global oil demand growth by 220,000 b/d to 1.65 million b/d this year, based on surging demand in China and other Asian countries outside of the Organization for Economic Cooperation and Development.

Energy prices also climbed in reaction to terrorist bombings of four Spanish commuter trains that killed at least 190 people. Although there was no direct link between the attacks and oil supplies, nervous traders bid up prices in a buying frenzy.

IEA said fears of pending supply cuts by most members of the Organization of Petroleum Exporting Countries, excluding Iraq, and increased political tension in Venezuela, along with tight gasoline supplies in the US, had boosted the near-month contract for benchmark US light, sweet crudes to $37.51/bbl earlier this month on the New York Mercantile Exchange.

Production by the 10 OPEC countries subject to quotas held relatively steady at 25.8 million b/d during February, representing 1.3 million b/d of overproduction, IEA reported. "Despite end-February progress in expanding export potential, loading delays at the Bashrah oil terminal cut 100,000 b/d from Iraqi supply," the report said.

Total world oil supplies rose by roughly 60,000 b/d to 82 million b/d during February. Non-OPEC production increased by about 140,000 b/d while total OPEC supply fell by some 90,000 b/d last month, EIA said

Energy prices
The April crude contract jumped by 68¢ to $36.78/bbl Thursday on NYMEX, while the May position shot up by 78¢ to $36.14/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 65¢ to $36.78/bbl.

Gasoline for April delivery soared by 5.01¢ to $1.1203/gal Thursday on NYMEX. Heating oil for the same month climbed by 1.11¢ to 89.04¢/gal. The April natural gas contract increased by 24.6¢ to $5.64/Mcf despite a bearish report Thursday by the US Energy Information Administration that only 28 bcf of natural gas were withdrawn from US underground storage during the week ended Mar. 5, well below the consensus of Wall Street analysts (OGJ Online, Mar. 12, 2004).

"The EIA storage withdrawal number was a lot lower than expected, but the market ran out of steam on the downside, so the late rally in crude oil helped trigger buying in natural gas," said analysts Friday at Enerfax Daily. "The market had been stuck in a technical range, but [Thursday's] strong close may have turned the technical picture bullish."

In London, the April contract for North Sea Brent crude escalated by 84¢ to $32.83/bbl Thursday on the International Petroleum Exchange. Gas oil for March delivery gained $7 to $273.25/tonne. However, the April natural gas contract fell by 7.9¢ to $3.61/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 28¢ to $31.95/bbl Thursday.

Contact Sam Fletcher at [email protected]