Sam Fletcher
Senior Writer
HOUSTON, Oct. 20 -- Energy prices rose Oct. 19 after Saudi Arabian Oil Minister Ali I. al-Naimi endorsed a counter-seasonal proposal to reduce production from the Organization of Petroleum Exporting Countries at a meeting in Qatar.
OPEC officials announced Oct. 20 they will cut the group's actual production by 1.2 million b/d to 26.3 million b/d, effective Nov. 1. That is slightly more than the 1 million b/d generally anticipated by industry analysts and applies only to the 10 OPEC members other than Iraq, which is still struggling to raise its production to prewar levels.
Saudi Arabia is scheduled for the biggest reduction, 380,000 b/d, followed by Iran, 176,000 b/d; Venezuela, 138,000 b/d; UAE, 101,000 b/d; and Kuwait and Nigeria, 100,000 b/d each. Algeria, Indonesia, Libya, and Qatar are scheduled for smaller reductions. OPEC's official production quota ceiling is currently 28 million b/d.
Oil Movements, a leading monitor of ocean-going crude tankers, said it expects shipments of OPEC crude to decline to 24.45 million b/d in the 4 weeks through Nov. 4, down from 25.01 million b/d in the 4 weeks ended Oct. 7, indicating that cartel members are already reducing exports because of lower prices. The average price for OPEC's basket of 11 benchmark crudes lost 71¢ to $54.56/bbl on Oct. 19.
OPEC usually increases crude exports in the final quarter of the year to meet peak winter demand. Some analysts earlier estimated that OPEC would have to boost production to 29 million b/d to meet demand at yearend. OPEC officials said they will continue monitoring the market until their next meeting Dec. 14 in Abuja, Nigeria.
"The effect on oil is some steadiness in prices near $59[/bbl], but nothing that puts us on the edge of our seats," said analysts in the Houston office of Raymond James & Associates Inc. "However, this is likely not the final word. A handful of ministers alluded to another possible cut when OPEC meets in December (another 500,000 b/d, possibly?)."
Energy prices
The November contract for benchmark US light, sweet crudes gained 85¢ to $58.50/bbl Oct. 19 on the New York Mercantile Exchange. The December contract advanced by $1.20 to $60.50/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 85¢ to $58.51/bbl. Heating oil for November delivery gained 2.42¢ to $1.72/gal on NYMEX. Unleaded gasoline for the same period increased by 1.91¢ to $1.49/gal.
The November natural gas contract continued to escalate, up 32.5¢ to $7.13/MMbtu on NYMEX with forecasts for cold weather for much of the US. "These [lower] temperatures are definitely apt to boost natural gas prices, though it is still up for grabs whether or not the chill has settled in with any sustainability. In any case, natural gas has increasingly made gains in the past few weeks," said Raymond James analysts.
In London, the December IPE contract for North Sea Brent crude gained $1.29 to $60.87/bbl. The November gas oil contract, however, fell by $14.25 to $534.75/tonne.
Contact Sam Fletcher at [email protected].
