Sam Fletcher
OGJ Online
HOUSTON, Oct.. 4 -- The near-month benchmark crude contract closed above $50/bbl Friday for the first time in the 21 years since crude futures began trading on the New York Mercantile Exchange.
The market recently pushed past the psychologically important threshold of $50/bbl in overnight electronic and intraday trading but dropped back each time to lower closings. Friday, the November contract for US light, sweet crudes hit $50.15/bbl before closing at $50.12/bbl, up by 48¢ for the day, as traders covered open sales contracts for fear that something might happen to push up prices over the weekend.
On the US spot market, West Texas Intermediate at Cushing, Okla., also surpassed $50/bbl for the first time, gaining 48¢ to $50.13/bbl. "Supply concerns were exacerbated by the aftermath of Hurricane Ivan with nearly 30%of total offshore Gulf of Mexico oil production still shut in as of Friday. Of particular concern is refiners' ability to replenish heating oil inventories, which are 17% below normal, heading into winter," said Robert S. Morris, Banc of America Securities LLC, New York.
Meanwhile, Nigerian President Olusegun Obasanjo said Friday that the leader of the rebel Niger Delta People's Volunteer Force had agreed to cease hostilities and disband his militia. There was no immediate confirmation from the rebels, but there also were no reports of fighting Friday, the date they previously set for "full-scale" armed attacks on oil workers and facilities in the oil-rich Niger Delta.
Energy prices
The December contract for benchmark US crudes also gained 48¢, to $49.69/bbl Friday on NYMEX. Gasoline for November delivery jumped by 2.46¢ to $1.35/gal, while heating oil for the same month advanced by 0.97¢ to $1.40/gal. However, the November natural gas contract dipped by 2.3¢ to $6.77/Mcf, "on a tumbling cash [spot gas] market and some profit-taking after a 16% price surge earlier in the week," said analysts Monday at Enerfax Daily.
"Traders were amazed at the extremely wide discount between physical gas prices and the front-month [NYMEX futures price]," they said. "The futures numbers seem very out-of-whack relative to [the spot gas market]. The wide spread is attributed to the potential for cold weather to become a factor in November."
They said, "November is the start of the [US gas storage] withdrawal season, whereas [the gas spot market] is showing more of a shoulder-month valuation. It is a tug-of-war where [gas spot market prices] will be under pressure to rise and futures [gas prices] to fall."
In the interim, natural gas "supply concerns heading into the winter propelled the January 2005 NYMEX futures contract to an all-time intraday high last Thursday of $8.20[/Mcf]," noted Morris in his Monday report.
In London, the November contract for North Sea Brent crude gained 24¢ to $46.62/bbl on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 10¢ to $43.29/bbl Friday. For all of last week, however, OPEC's basket price increased to an average $43.11/bbl from a revised average of $40.94/bbl the previous week, compared with an average price of $28.10/bbl for all of 2003.
Contact Sam Fletcher at [email protected]
