Sam Fletcher
Senior Writer
HOUSTON, Sept. 25 -- Front-month crude futures prices hit a 10-month low on Sept. 22 while natural gas registered its lowest closing in 2½ years as US inventories continued to swell.
Analysts in the Houston office of Raymond James & Associates Inc. blamed falling energy prices on the apparent easing of geopolitical tensions between Iran and the US. "Over the weekend, Iranian President Mahmoud Ahmedinejad reiterated his position of pursuing peaceful nuclear technology and said that he is open to serious negotiations to bring the standstill to an end. It now seems that the standoff will be resolved through talks rather than sanctions or military action," they said.
Another factor pulling down oil prices was an announcement by BP PLC that it expects to resume most production from Prudhoe Bay within a week, bringing total production back up to 400,000 b/d from 250,000 b/d, analysts said (OGJ Online, Sept. 22, 2006).
"On the natural gas front, increasing levels of inventories and waning demand due to mild weather are expected to continue to affect prices going forward. From a weather perspective, the lack of hurricanes hitting the Gulf of Mexico this season and the prospect of a warm winter are also weighing in on prices," Raymond James analysts reported.
Raymond James also slashed its fourth-quarter price estimates to $5.75/Mcf for natural gas, down from $7.75/Mcf previously, and to $62/bbl for benchmark US crudes, down from $68/bbl. "Large gas injections experienced over the last couple of weeks have undoubtedly created a bearish short-term outlook for natural gas prices. With 7 weeks left in our gas injection period and the high probability of limited storage capacity, it now appears that 'gas on gas' competition will depress US natural gas prices for at least the next several months," analysts said.
Energy prices
The November contract for benchmark US light, sweet crudes traded at $60.20-62.26/bbl Sept. 22 before closing at $60.55/bbl, down $1.04 for the day on the New York Mercantile Exchange. The market apparently expects the Organization of Petroleum Exporting Countries to defend a $60/bbl futures market price for crude.
The December crude contract dropped 99¢ to $61.54/bbl. Heating oil for October lost 3.16¢ to $1.65/gal on NYMEX. Unleaded gasoline for the same month dipped by 2.82¢ to $1.47/gal. The October natural gas contract fell by 15.4¢ to $4.63/MMbtu. In London, the November IPE contract for North Sea Brent crude declined by 93¢ to $60.41/bbl. The October gas oil contract lost $5.50 to $533.75/tonne.
However, the average price for OPEC's basket of 11 benchmark crudes increased by 20¢ to $56.12/bbl on Sept. 22.
Contact Sam Fletcher at [email protected].
