Sam Fletcher
Senior Writer
HOUSTON, Mar. 8 -- Crude prices continued to fall Mar. 7 in anticipation that members of the Organization of Petroleum Exporting Countries would vote to maintain the group's production quota at 28 million b/d in their Mar. 8 meeting.
As expected, OPEC ministers said there are "too many geopolitical issues" affecting petroleum prices for the group to make any adjustment in the production quota that it set in June. However, they will continue monitoring world markets until the group's next meeting June 1 in Venezuela.
One factor affecting Mar. 7 trading was a prediction by Nigerian officials that most of that country's shut-in production will soon resume. In February, Royal Dutch Shell PLC shut in 455,000 b/d, 20% of Nigeria's total production following attacks on oil facilities and the kidnapping of nine workers in the Niger Delta (OGJ Online, Feb. 27, 2006).
Some traders apparently were comforted by rumors the 35-member United Nations Security Council may be close to an agreement with Iran over its nuclear program. According to European sources, Russia outlined a tentative proposal that Iran abandon production of enriched uranium on an industrial scale in favor of small-scale research and development. However, scientists said even a small research program of uranium enrichment would eventually produce enough fuel for weapons.
The International Atomic Energy Agency reported this week to the Security Council on the agency's months-long effort to get Iran to suspend its nuclear research program. Energy markets worried earlier that Iran, OPEC's second biggest producer, might reduce its crude exports if the Security Council imposed trade sanctions in that dispute (OGJ Online, Mar. 6, 2006).
US crude stock jumps
The Energy Information Agency said Apr. 8 that commercial inventories of US crude jumped by 6.8 million bbl to 335.1 million bbl in the week ended Mar. 3. That increase exceeded market expectations and boosted crude stocks to the highest level since
May 1999. Gasoline stocks fell by 1.1 million bbl to 224.8 million bbl during the same period. Distillate fuel inventories dropped by 2.7 million bbl to 131.4 million bbl, with a large decrease in heating oil overriding an increase in diesel fuel.
US imports of crude increased by 267,000 b/d to 10.1 million b/d in the same week. Input into US refineries fell by 391,000 b/d to 14.1 million b/d with refineries operating at 83% of capacity.
EIA earlier reduced its second-quarter forecast of US oil demand by 90,000 b/d to 20.8 million b/d, equivalent to a 1.5% growth rate from year-ago levels, down from 1.95% projected in February. It also cut its global demand outlook for the same quarter by 100,000 b/d to 83.7 million b/d for an annual growth rate of 1.7% instead of 1.95% as earlier predicted.
In the first quarter of this year, US oil demand was essentially flat at 20.6 million b/d. EIA in February had projected an increase of 40,000 b/d to 20.67 million b/d. World demand in the first quarter increased by 1 million b/d to 84.9 million b/d, up 1.19% from last year but less than the 1.3% growth earlier predicted.
Energy prices
The April contract for benchmark US light, sweet crudes dropped 83¢ to $61.58/bbl Mar. 7 on the New York Mercantile Exchange, while the May position lost 73¢ to $63.32/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 82¢ to $61.59/bbl. Heating oil for April delivery fell 3.55¢ to $1.72/gal on NYMEX. Gasoline for the same month declined by 2.26¢ to $1.63/gal.
The April natural gas contract, however, inched up by 13.1¢ to $6.68/MMbtu "on short-covering after the market has dropped sharply over the last several weeks," said analysts at Enerfax Daily. "Storage withdrawals over the remaining [winter] weeks would have to average 95 bcf to even break below 1.5 tcf by the end of March," they said.
In London, the April IPE contract for North Sea Brent crude dropped $1.17 to $61.17/bbl. The March gas oil contract plunged by $15.75 to $544.25/tonne.
The average price for OPEC's basket of 11 benchmark crudes lost $1.17 to $57.47/bbl on Mar. 7.
Contact Sam Fletcher at [email protected].
