MARKET WATCHOPEC mulls second quota hike as prices rise

Crude prices hit new record highs for the second consecutive session June 20 on the New York futures market, but the conference president of the Organization of Petroleum Exporting Countries is considering an additional quota increase of 500,000 b/d if prices continue "at the same level" June 24.

June 21, 2005

2 min read

Sam Fletcher
Senior Writer

HOUSTON, June 21 -- Crude prices hit new record highs for the second consecutive session June 20 on the New York futures market, but the conference president of the Organization of Petroleum Exporting Countries is considering an additional quota increase of 500,000 b/d if prices continue "at the same level" June 24.

Ahmad Fahad Al-Ahmad Al-Sabah, who is also oil minister of Kuwait, said he'd begin consulting other ministers about raising OPEC's production ceiling to 28.5 million b/d if the price rise isn't halted. OPEC members last week authorized an additional quota hike prior to the group's Sept. 19 meeting if crude prices didn't fall.

But only Saudi Arabia has spare production capacity at the moment, and Saudi officials have said they've been unable to find buyers for their heavier, sourer incremental crude.

Energy prices
The July contract for benchmark US sweet, light crudes jumped by 90¢ to an all-time high closing of $59.37/bbl June 20 on the New York Mercantile Exchange. The August contract settled at $59.88/bbl, up 70¢ for the day after trading as high as $60.02/bbl on NYMEX. Some analysts expect the near-month contract to close above $60/bbl this week. Meanwhile, a spot market price for West Texas Intermediate at Cushing, Okla., was not available. On NYMEX, heating oil for July delivery gained 1¢ to $1.66/gal. However, gasoline for the same month dipped by 0.15¢ to $1.6456/gal.

The July natural gas contract lost 2¢ to $7.67/MMbtu on NYMEX, "as early buying on soaring crude oil prices and a strong [spot natural gas] cash market in the face of fairly warm weather this week gave way to profit taking," said analysts at Enerfax Daily.

In London, the August contract for North Sea Brent crude increased by 56¢ to $58.32/bbl on the International Petroleum Exchange.

The average price for OPEC's new basket of 11 benchmark crudes was up by $1.20 to $52.78/bbl on June 20.

Contact Sam Fletcher at [email protected]