Sam Fletcher
Senior Writer
HOUSTON, Mar. 10 -- The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes jumped by 86¢ to a new high of $49.87/bbl on Mar. 9, reducing chances that OPEC ministers will cut production at their Mar. 16 meeting.
"The OPEC basket is well above its previous peak in dollar, but not yet euro, terms. The bull run has been so consistent that the value of the OPEC basket has now risen 18 times over the past 20 trading days, gaining $9.22/bbl in the process," said Paul Horsnell, Barclays Capital Inc., London. "Wholesale gasoline prices are now also at record highs," he said. "Retail prices are also set to reach new highs."
The "huge range" between "the most bullish and most bearish" market outlooks "represents something of a dilemma for OPEC when it meets in Iran next week and a reason for some caution," Horsnell said. "On the one hand, if the call on OPEC for the year really is close to 28 million b/d, then ministers need to be positioned to detect that as soon as possible and be prepared to act swiftly to take oil off the market."
But if the call on OPEC turns out to be 30 million b/d as Barclays Capital and some others have indicated, "then catching up later and cooling down what would be extreme tightness in the back half of the year would prove to be nigh impossible," Horsnell said. "The policy of least regret is to maintain production fairly stable and to keep an eye on the situation with another meeting next month.
"That is what we expect the outcome to be, together with some farewell ceremonies for the $22-28[/bbl] price band and the first steps towards a more explicit floor of about $35[/bbl] for the value of the OPEC basket," he said.
Traders shrugged off the Energy Information Administration's report that commercial US inventories of crude increased by 3.2 million bbl to 302.6 million bbl during the week ended Mar. 4. However, distillate fuel stocks fell by 800,000 bbl to 109.2 million bbl during the same period, and gasoline inventories dipped by 200,000 bbl to 224.3 million bbl (OGJ Online, Mar. 9, 2005).
Energy prices
The April contract for benchmark US light, sweet crudes gained 18¢ to $54.77/bbl Mar. 9 on the New York Mercantile Exchange, while the May contact climbed by 15¢ to $55.38/bbl. On the US spot market, West Texas Intermediate was up by 17¢ to $54.77/bbl.
Gasoline for April delivery dipped by 0.24¢ to $1.53/gal on NYMEX, but heating oil for the same month increased by 0.87¢ to match gasoline at $1.53/gal. The April natural gas contract gained 3.3¢ to $6.88/MMbtu on NYMEX, the highest level since late December, said analysts at Enerfax Daily.
EIA said Mar. 10 that 139 bcf of natural gas was withdrawn from US underground storage during the week ended Mar. 4. That was up from 107 bcf the previous week and 28 bcf during the same period last year, and exceeded the consensus among Wall Street analysts. US gas storage now stands at 1.47 tcf, which is up by 327 bcf from year-ago levels and 301 bcf above the 5-year average.
In London, the April contract for North Sea Brent crude increased by 54¢ to $53.38/bbl Mar. 9 on the International Petroleum Exchange.
Contact Sam Fletcher at [email protected]
