Sam Fletcher
Senior Writer
HOUSTON, Oct. 30 -- Crude prices rebounded Oct. 27 on increased confidence among traders that members of the Organization of Petroleum Exporting Countries will comply with the proposed production cut of 1.2 million b/d to 26.3 million b/d, well below the 28 million b/d ceiling set 2 years ago.
"Oil prices gained further momentum at the end of last week as geopolitical tensions began to creep back into the picture after Iran announced that it had doubled its capacity to enrich uranium and after Britain deployed forces from its Royal Navy to guard the Ras Tanura oil terminal offshore Saudi Arabia on news of a possible insurgent attack," said Robert S. Morris, Banc of America Securities LLC, New York.
Over the weekend, angry villagers in the Niger Delta stormed an oil facility operated by Agip SPA, part of ENI SPA. "Although this was a peaceful protest, oil operations were forced to shut down temporarily. This recurring theme in the oil-rich region has taken a toll on Nigerian crude oil production, which is estimated to have lost 600,000-800,000 b/d due to civil unrest," said analysts in the Houston office of Raymond James & Associates Inc.
Colder-than-normal temperatures across much of the country last week also contributed to the strength in both crude oil and natural gas prices. "However, temperatures are likely to moderate a bit this week," Morris said. The surprise draw of US crude oil inventories reported for the week ended Oct. 20 "was all attributable to a decline in imports which could have been due to timing differences in tanker loadings and with the Louisiana Offshore Oil Port closed for more than 70 hours during the reported week," he said. The lower-than-expected injection of 19 bcf of natural gas into US underground storage during the same period "was most likely due to a greater impact from the early cold weather than we had modeled, combined with some 'line pack,' given how full storage is at this juncture," said Morris.
Meanwhile, "China's buying for its strategic reserve is flooring any price decline" in world crude markets, said analysts at the Societe Generale corporate investment-banking group.
Energy prices
The December contract for benchmark US light, sweet crudes gained 39¢ to $60.75/bbl Oct. 27 on the New York Mercantile Exchange. The December contract increased 54¢ to $62.53/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 39¢ to $60.76/bbl. However, heating oil for November delivery lost 0.56¢ to $1.69/gal on NYMEX. Unleaded gasoline for the same month slipped by 0.38¢ but closed virtually unchanged at $1.56/gal.
The November natural gas contract dropped 34.4¢ to $7.15/MMbtu on NYMEX. On the spot market, gas at Henry Hub, La., fell 41¢ to $7.45/MMbtu. Gas prices "may give up some ground this week after a 26% rally over the last 2 weeks," said Raymond James analysts. "Record storage of 3.461 tcf and speculation of milder than normal winter weather could drag prices lower as we enter the withdrawal season," they said.
In London, the December IPE contract for North Sea Brent crude increased by 31¢ to $61.08/bbl. But November gas oil dropped $5.75 to $537.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes lost 59¢ to $55.53/bbl Oct. 27. So far this year, OPEC's basket price has averaged $62.02/bbl, up from an average $50.64/bbl for all of 2005.
Contact Sam Fletcher at [email protected].
