Market watch, Aug. 7

International oil prices surged to nearly $30/bbl Friday as traders�shocked by a sharp drop in US oil inventories last week in the face of presumed overproduction by the Organization of Petroleum Exporting Countries�bought up the market.

Aug 7th, 2000


International oil prices surged to nearly $30/bbl Friday as traders�shocked by a sharp drop in US oil inventories last week in the face of presumed overproduction by the Organization of Petroleum Exporting Countries�bought up the market.

The September contract for NYMEX crude oil jumped $1.30 to finish at $29.96/bbl Friday on the New York Mercantile Exchange. The October contract was up $1.04 to $29.36/bbl.

In after-hours electronic trading early today, the September contract was fetching $30.02/bbl, while the October contract was unchanged.

Reports by the American Petroleum Institute and the US Department of Energy of low inventories also triggered a 2.39� surge in the September contract for home heating oil to 81.85�/gal. Unleaded gasoline for the same month also jumped 1.67� to 87.59�/gal.

The September contract for natural gas gained another 4.6� to $4.30/Mcf Friday on the NYMEX.

In London, the September contract for North Sea Brent jumped $1.06 to $29.37/bbl on the International Petroleum Exchange, and is expected to remain above the $29/bbl level today. The September gas contract lost 13� to the equivalent of $2.46/Mcf on the IPE.

Players in that market said oil prices could soon move above $30/bbl with another expected drop in US oil stocks this week and no extra production on the horizon. Analysts now expect members of OPEC to avoid another production hike before the ministers' conference scheduled for Sept. 26-29 in Caracas.

Venezuelan President Hugo Chavez is scheduled to arrive in Saudi Arabia today on the first leg of a whirlwind tour of OPEC members in an effort to strengthen unity.

"There are all kinds of pressures from all parts of the world to try and take petroleum once again to low levels. We have to strengthen the mechanisms of unity and consensus to respect production quotas, markets, the balance in the market, and in this way defend fair prices for our oil," he said.

At the upcoming meeting, Chavez wants OPEC ministers to discuss ways "to advance in the petrochemical strategy" as a means of enhancing the value of their oil and gas reserves. He also underlined the need for "strategic agreements to advance in the gas strategy."

On the Singapore exchange, the September contract for Brent crude oil was at $29.37/bbl, up $1.12 from Friday's close. The October contract gained 90� to close at $28.35.

On Friday, the average price for OPEC's basket of seven crudes gained 95� to $27.35/bbl.

That basket price averaged $25.64/bbl last week, up from $25.59/bbl the previous week.

So far this year, the OPEC basket of crudes has averaged $26.44/bbl, up sharply from $17.47/bbl for all of 1999.

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