Sam Fletcher
Senior Writer
HOUSTON, Mar. 3 -- Futures prices for petroleum products jumped to a 4-month high Mar. 2, pulling up other commodities on the New York market as worries about supply security prompted speculation that the steep February drop in energy prices may have been too much.
A Nigerian official said Mar. 2 that the three remaining foreign hostages held by rebels in the Niger Delta are expected to be released in "a couple of days." Rebels are still threatening to attack oil facilities in that area, however.
Also, markets remain apprehensive that terrorists may make more assaults on the producing and processing infrastructure in Saudi Arabia. There also is a danger of a US-European confrontation with Iran after the International Atomic Energy Agency reports Mar. 6 on Tehran's nuclear program.
"The last days of winter are upon us. A majority of meteorologists agree that the current bout of below normal temperatures in the Northeast should be the last real cold front of the year. After the cold start to March, forecasts for the balance of the month call for temperatures to gradually warm up," said Ronald J. Barone, managing director of equity research for the Natural Gas & Electric Utilities Group of UBS Securities LLC, New York.
"Following the supply disruptions caused by the destructive 2005 hurricane season, the country entered the winter heating season with grave concern that demand could outstrip supply and result in an energy crisis," Barone said. "Fortunately, the country is experiencing one of the warmest winters in history and a large gas surplus."
Possible disruptions
That situation may be short-lived, however. The National Hurricane Center reported the annual number of hurricanes has increased since 1995 and is expected to continue over the next 10 years. "Many forecasters are calling for another intense hurricane season in 2006," Barone said.
The number of undersea earthquakes also is increasing and can cause mudslides that damage pipelines in the Gulf of Mexico. "A mudslide in 2004, for example, tore off the Southern Natural Gas Pipeline, resulting in many months of lost production," Barone said. "Given the increasing probability of adverse natural phenomenon in the gulf, be it in the form of hurricanes or earthquakes (and the unlikelihood that another mild winter will come to the rescue), gas prices will remain highly sensitive to Mother Nature supply shocks."
Energy prices
The April contract for benchmark US light, sweet crudes bumped up by $1.39 to $63.36/bbl Mar. 2 on the New York Mercantile Exchange—a 3-week high for the front-month contract. The May contract escalated by $1.45 to $65.07/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased by $1.39 to $63.37/bbl.
Gasoline led the rally, with the April contract gaining 7.01¢ to $1.69/gal. Heating oil for the same month was up by 5.83¢ to $1.80/gal on NYMEX.
The April natural gas contract inched up by 2.7¢ to $6.76/MMbtu. "Warm weather and ample storage have contributed to the 40% sell-off in natural gas prices this year. We are looking to coal, which is trading at $5.50/MMbtu equivalent, to set the next floor for the natural gas market," said analysts in the New York office of Deutsche Bank AG.
In London, the April IPE contract for North Sea Brent crude jumped by $1.62 to $64.07/bbl. Gas oil for March increased by $12.50 to $558.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 97¢ to $58.10/bbl on Mar. 2.
Contact Sam Fletcher at [email protected].
