Market watch, June 26

Energy futures prices closed mixed in trading on the New York Mercantile Exchange Friday. Trading was less volatile compared with the rest of the week as traders finally started to absorb the real effects of OPEC's production increase. Recent reports blaming regulations and speculation for the price increase�not the lack of supply�also had a calming effect on traders.


Energy futures prices closed mixed in trading on the New York Mercantile Exchange Friday. Trading was less volatile compared with the rest of the week as traders finally started to absorb the real effects of OPEC's production increase.

Recent reports blaming regulations and speculation for the price increase�not the lack of supply�also had a calming effect on traders.

NYMEX light sweet crude oil, the American benchmark, rose by 6� to settle at $32.25/bbl for August delivery, while the September contract stood at $30.85, up by 18�.

Refined petroleum products ended lower with July home heating oil losing 0.79� to settle at 80.64�/gal, while unleaded gasoline for the same month slipped by 0.03� to rest at $1.0810.

NYMEX natural gas for August delivery declined by 10.3� to end at $4.45/Mcf of gas.

NYMEX increased margins on its natural gas contract to $4,200 from $3,500 for clearing members; to $4,620 from $3,850 for members, and to $5,670 from $4,725 dollars for customers as of the close of business Friday.

Meanwhile, in London, North Sea Brent crude oil futures ended higher on the International Petroleum Exchange (IPE). On Friday, IPE August Brent futures settled at $30.39/bbl, up by 14� from the previous close.

Brokers said Brent seemed set to remain above $30/bbl, unless there were some unexpectedly bearish stocks data.

On the IPE, the July natural gas contract closed at the equivalent of $2.71, up 5�.

Having digested news of OPEC's hike in production from July 1, the IPE market remained firm.

News of a possible disruption to Norwegian oil exports also helped boost prices late last week. The Norwegian government stepped in to stop the impending oil worker strike, however.

In Singapore, the price of North Sea Brent crude oil started the week on another bullish note. Traders said the product market, taking into consideration the refinery fire in Kuwait, provided further impetus for crude prices to strengthen.

As the day ended, Singapore Brent for August delivery was at $30.39/bbl, up by 24� from Friday's close, while the September position added 31� to settle at $29.41.

The price of the OPEC basket of seven crudes stood at $30/bbl Friday, compared with $29.85 the

previous day, according to OPEC Secretariat calculations.

The price of OPEC's basket of seven crudes fell to $28.89/bbl last week, compared with $29.52 in the second week of June. According to figures released by the OPEC secretariat today, the price of the basket so far this year up to June 22 has averaged $26.10/bbl. In May, the basket price averaged $26.94/bbl, as opposed to $22.93 in April and $26.71 in March.

For the first quarter of 2000, the basket price averaged $26.11/bbl, as against $23.42 in the fourth quarter of 1999. For 1999 as a whole, the price of the basket averaged $17.47/bbl, compared with $12.28 the previous year.

The recent hike in oil prices in the international oil market and developments that have taken shape in the past few days are due to global, political, and economic conditions, according to Hossein Kazempour Ardebili, senior adviser to the Iranian petroleum minister.

Ardebili, who is the OPEC governor for his country, said certain current factors, such as continued strikes and threatened strikes of oil industry workers in Nigeria and Norway, as well as the adverse consequences of the Iraqi oil-for-food deal, constantly inject instability into the international oil market.

In an interview with the English-language Iran Daily Sunday, he also noted that the seasonal rise in petrol demand in the US also is putting upward pressure on crude prices.

"The shift from ordinary petrol to reformulated gasoline (RFG) in the US, indeed an environmental consideration, has led to an increase in demand for light crude," says Ardebili.

The fact that the US has increased its demand for importing oil products "is in itself using over 90% of the production capacity of refineries that produce petrol worldwide," Ardebili pointed out.

He noted that the US now needed 6 million b/d of oil products, which was an increase of over two million b/d compared with the corresponding figure in 1998.

Ardebili added that global economic growth of 4.2% in 2000, the booming economy of Southeast Asia, and an increase in crude oil reserves worldwide were other factors responsible for the hike in crude prices.

He predicted that in the third quarter of 2000 about 1.5 million b/d of crude would be added to global reserves and that OPEC's output hike, which had so far this year amounted to 2.3 million b/d, could eventually offset the excess in reserves.

Ardebili suggested that the best price for international crude oil was $25/bbl. "OPEC's main target is to prove that if American and European governments adjust taxes on oil products, the petrol price will be normalized," he concluded.

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