Market watch, July 25

Worldwide energy futures prices continued to tumble Monday as US gasoline shortages seemed to disappear before threats of increased oil production, officials said.


Worldwide energy futures prices continued to tumble Monday as US gasoline shortages seemed to disappear before threats of increased oil production, officials said.

The August contract for unleaded gasoline plunged 5.11� to 86.2�/gal on the New York Mercantile Exchange, amid market perceptions that the worst of the summer supply shortages is over.

US refineries have been operating at the fullest possible utilization rates to maximize gasoline production this summer. Many market analysts see gasoline supply restraints easing in conjunction with expectations of more crude coming into the world market.

However, US legislators from northern consumer states are now pushing refiners to boost production of home heating oil, probably at the expense of gasoline production, to ensure adequate fuel supplies for this winter.

Led by Monday's drop in gasoline future prices, the September contract for benchmark US light, sweet crudes fell 54� to $28.02/bbl on the NYMEX. The October contract was down 56� to $27.80/bbl.

The August contract for home heating oil also fell 1.06� to 75.83�/gal. The August natural gas contract dropped 11.9� to $3.72/Mcf.

In London, the September contract for North Sea Brent oil lost 60� to close at $26.92/bbl on the International Petroleum Exchange. But the August gas contract regained 7� to the equivalent of $2.77/Mcf on the IPE.

North Sea Brent oil futures prices fell further on the Singapore exchange, in line with the downward trend seen in London and New York. As the day ended, Singapore Brent for September was at $26.70/bbl, down 72�. The October contract fell 80� to $26.62.

What direction the London oil market may take from that point is still unclear, but energy brokers said they expect Brent futures may fall to $26.50/bbl before consolidating. The market's tone is now more cautious and bearish in the face of apparently serious threats by members of the Organization of Petroleum Exporting Countries to increase production by 500,000 b/d if world prices remain in the range of $30/bbl.

The average price for OPEC's basket of seven crudes retreated another 63� to $25.70/bbl on Monday.

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