MARKET WATCHCrude oil prices plunge on New York, London markets

June 29, 2004
Crude oil prices on New York and London markets tumbled by more than $1/bbl Monday in response to the resumption of normal exports from Iraq and Norway and also to an early handoff of Iraqi sovereignty by US officials to an interim Iraqi government.

By OGJ editors
HOUSTON, June 28 -- Crude oil prices on New York and London markets tumbled by more than $1/bbl Monday in response to the resumption of normal exports from Iraq and Norway and also to an early handoff of Iraqi sovereignty by US officials to an interim Iraqi government.

The surprise sovereignty ceremony came 2 days ahead of the announced June 30 handoff—eliminating any market fears about possible terrorist strikes on Wednesday, traders said.

Some traders said the oil crude futures price fall of more than $1/bbl was overdone and that a technical correction to higher prices was expected, at least temporarily.

In Norway, exports returned to normal with the end of a labor strike by two oil worker unions that had triggered an almost complete shutdown of production from the Norwegian continental shelf. That area normally produces some 3.3 million b/d of oil and 7.3 bcfd of natural gas (OGJ Online, June 25, 2004).

Meanwhile, Iraqi authorities announced that final repairs to sabotaged pipelines in the southern part of the nation were completed during the weekend. Analysts expressed surprise about the resilience of the Iraqi oil industry.

Energy prices
The August contract price for benchmark US light, sweet crudes plunged by $1.31/bbl to $36.24/bbl on the New York Mercantile Exchange. That was the lowest NYMEX close for the near-term month in more than 2 months. The September contract dropped by $1.29/bbl to $36.31/bbl.

On the US spot market, West Texas Intermediate at Cushing, Okla., dropped by 81¢ to $36.34/bbl.

Refined products also closed lower. Gasoline for August delivery fell by 6.09¢ to $1.1448/gal Monday. Heating oil for the same month was down 3.57¢ to 97.50¢/gal.

Natural gas futures for July delivery on NYMEX expired Monday, closing at 21.2¢ lower to $6.141/Mcf on "a combination of factors that sent the oil complex lower and on underlying natural gas fundamentals that remain weak in the near term," said analysts Tuesday at Enerfax Daily. The August contract lost 19.1¢ to $6.201/Mcf Monday.

In London, Brent crude oil futures fell to the lowest levels in 2 months on Monday on the International Petroleum Exchange. The August contract for North Sea Brent crude lost $1.27/bbl to $33.70/bbl.

Gas oil for July delivery lost $8.75 to $308.25/tonne. The July natural gas contract also declined, down by 5¢ to the equivalent of $3.78/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dipped by 88¢ to $33.07/bbl Monday. The US Energy Information Administration has forecast that the OPEC basket will average $32/bbl for 2004 and $30/bbl for 2005.

The EIA also forecast that 2004 OPEC net oil export revenue will be $285 billion, 19% higher than 2003 levels.