HOUSTON, Jan. 24 -- Energy prices generally rebounded Jan. 21 as the Organization of Petroleum Exporting Countries revised its estimate of world markets' call on its crude upward by 390,000 b/d to 28.56 million b/d.
For the usually weaker second quarter of the year, OPEC revised its estimated call up by 540,000 b/d to 27.68 million b/d. That could mean that at its Jan. 30 meeting, the cartel will not reduce its current production quota ceiling of 27 million b/d for the 10 members excepting Iraq, analysts said. OPEC reduced its production by 800,000 b/d in January from December levels. However, officials said Iraq's production was unchanged in January at 1.9 million b/d.
Trading also was impacted by cold weather that hammered the Northwest US over the weekend.
"After much volatility, oil prices ended the week essentially flat while natural gas prices increased modestly," said Robert S. Morris, Banc of America Securities LLC, New York.
"An apparently bearish US crude-plus-product inventory report was offset by concerns regarding supply amidst the continued cold weather in the Northeast and supply outages in Iraq. Also, the Paris-based International Energy Agency boosted its global crude oil demand growth forecast slightly for this year to 1.8%," Morris reported Jan. 24. "While investors will continue to keep a close eye on the weather forecasts (winter-to-date weighted temperatures in the US have been 3.5% warmer than the 10-year average), perhaps the greater focus this week will be on headlines out of the Middle East with Iraq elections and OPEC's meeting in Vienna both set for" Jan. 30.
He said, "We do believe that OPEC will need to cut production again in the second quarter to support oil prices in the low $40/bbl (West Texas Intermediate spot) range although we believe such a decision is unlikely at the upcoming meeting with oil prices approaching $50/bbl."
The new near-month March contract for benchmark US light, sweet crudes jumped by $1.22 to a 2-month high of $48.53/bbl Jan. 21 on the New York Mercantile Exchange, while the April contract closed at $48.60/bbl, up by $1.34 for the day, after soaring as high as $49/bbl during trading. On the US spot market, WTI at Cushing, Okla., escalated by $1.37 to $48.29/bbl. Heating oil for February delivery gained 4.39¢ to $1.38/gal on NYMEX, it's highest closing in a month. Gasoline for the same month increased by 4.2¢ to $1.30/gal, nearly a 2-month high, analysts said.
However, the February natural gas contract dipped by 6.8¢ to $6.24/MMbtu on Jan. 21, "after a firm opening on the cold weather, as early short covering [of excess open sales contracts] after a neutral weekly inventory report was offset by late selling on the milder forecasts for this week. But some forecasters are still looking for a cold February after the late January warm-up," said analysts at Enerfax Daily.
"Along the natural gas front, the below-normal temperatures throughout much of the country and the anticipated storm in the Northeast this past weekend lent support to natural gas prices," Morris said.
In London, the March contract for North Sea Brent crude increased by $1.41 to $45.73/bbl on the International Petroleum Exchange.
The average price for OPEC's basket of seven benchmark crudes was up by 95¢ to $41.63/bbl on Jan. 21 after losing 84¢ to $40.68/bbl on Jan. 20. For last week as a whole, however, OPEC's basket price averaged $41.42/bbl, up by $1.54 from the previous week.
Contact Sam Fletcher at [email protected]