MARKET WATCHCrude prices rise despite talk of OPEC output hike

March 15, 2005
Crude prices climbed as traders shrugged off a Mar. 14 suggestion by Saudi Arabia that the Organization of Petroleum Exporting Countries raise its production quota by 500,000 b/d to 27.5 million b/d at the Mar. 16 meeting of ministers in Isfahan, Iran.

Sam Fletcher
Senior Writer

HOUSTON, Mar. 15 -- Crude prices climbed as traders shrugged off a Mar. 14 suggestion by Saudi Arabia that the Organization of Petroleum Exporting Countries raise its production quota by 500,000 b/d to 27.5 million b/d at the Mar. 16 meeting of ministers in Isfahan, Iran.

That proposal by Saudi Arabia's Minister of Petroleum and Mineral Resources Ali I. al-Naimi to increase the quota in an effort to deflate crude prices apparently was not well received by other OPEC ministers either. Fathi bin Shatwan, Libya's oil minister, rejected it, saying that OPEC no longer controls the oil market.

Most OPEC members are already producing at capacity. Only Saudi Arabia and Kuwait have measurable volumes in reserve, analysts said. In a Mar. 15 report by Dow Jones Newswires, Ahmad Fahad Al-Ahmd Al-Sabah, Kuwait's energy minister and OPEC's conference president, said ministers with whom he had spoken wanted to defer a production hike until market conditions warrant such a move.

He said the 10 OPEC members currently governed by production quotas, excluding Iraq, are now producing 27.7 million b/d. Therefore, increasing the quota would not add any production.

Energy prices
On the New York Stock Exchange, the April contract for benchmark US sweet, light crudes fell to $53.52/bbl following the Saudi proposal but then rebounded to close at $54.95/bbl, up 52¢ for the day, after trading as high as $55.05/bbl. The May contract increased by 53¢ to $55.65/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., continued to track the NYMEX near-month contract, moving up by 52¢ to $54.95/bbl.

The April natural gas contract jumped by 36.6¢ to $7.14/MMbtu on NYMEX, "surging to a 12-week high on cool weather forecasts for this week and steady technical buying by the [investment] funds, triggering a bunch of buy-stops after an early break of resistance," said analysts at Enerfax Daily. However, they said, "When the reality of the [sufficient US natural gas] storage situation finally sets in, look for an even quicker drop to the downside."

Meanwhile, heating oil for April delivery dropped by 0.67¢ to $1.536/gal on NYMEX. Gasoline for the same month fell by 1.1¢ to $1.51/gal.

In London, the April contract for North Sea Brent crude escalated by 56¢ to $53.66/bbl on the International Petroleum Exchange.

The average price for OPEC's basket of seven benchmark crudes increased by 39¢ to $49.59/bbl on Mar. 14.

Contact Sam Fletcher at [email protected]