MARKET WATCHEnergy futures prices continue to fall with profit taking

Oct. 20, 2004
Energy prices fell again Tuesday for the second consecutive day, as futures market speculators locked in profits from the recent price run-up.

Sam Fletcher
Senior Writer

HOUSTON, Oct. 20 -- Energy prices fell again Tuesday for the second consecutive day, as futures market speculators locked in profits from the recent price run-up.

Some analysts claimed that the recent spike in energy prices to record levels, as markets built against possible winter shortages, was overly excessive. But most traders indicated confidence that they haven't yet seen the end of extraordinarily strong energy futures prices.

Indeed, the Energy Information Administration said Wednesday that US distillate stocks fell for the fifth week in a row, plummeting by 1.9 million bbl to 119 million bbl during the week ended Oct. 15, at the lower end of the average range for this time of year. Commercial US crude inventories increased by 1.2 million bbl to 279.4 million bbl in the same period, EIA reported, while gasoline stocks were up by 700,000 bbl to 199.9 million bbl.

With the Nov. 1 official start of the winter heating season just days away, US refiners last week actually reduced production of heating oil "somewhat," EIA said. Crude iinput into US refineries increased by 280,000 b/d to nearly 14.8 million b/d last week as some refineries returned to normal operations after routine maintenance.

US gasoline production increased last week, averaging 8.7 million b/d, but imports of finished gasoline and blending components dropped sharply, averaging 720,000 b/d.

Energy prices
The November contract for benchmark US light, sweet crudes dropped 38¢ to $53.29/bbl Tuesday on the New York Mercantile Exchange. That contract fell as low as $52.59/bbl after opening at $53.64/bbl at the start of that session but regained part of that initial loss as some traders were forced to cover open sales positions. The December crude contract lost 20¢ to $52.64/bbl on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down 38¢ to $53.29/bbl. Heating oil for November delivery dipped by 0.12¢ to $1.5085/gal on NYMEX, but gasoline for the same month gained 0.69¢ to $1.3573/gal.

The November natural gas contract shot up by 31.7¢ to $7.12/Mcf on NYMEX, "driven higher early by record heat in Texas and cool Northeast weather that firmed the cash [spot] market," said analysts Wednesday at Enerfax Daily. Later in that session, the price continued to rise on technical buying, as existing buy orders above $7/Mcf were triggered.

In London, the December contract for North Sea Brent crude lost 14¢ to $48.77/bbl on the International Petroleum Exchange.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dropped 49¢ to $44.98/bbl Tuesday.

Contact Sam Fletcher at [email protected]