MARKET WATCHNew York energy prices slip amid mixed signals

By OGJ editors
HOUSTON, May 23 -- Energy prices generally slipped May 20 among mixed market signals.

Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. lowered their outlook for Russia's crude production in 2005 and 2006. "While production growth in Russia averaged 9% from 2001 through 2004, we think that even 1-3% average growth over the next 3 years will be difficult," they said.

For 2005, RJA reduced its Russian growth forecast to 230,000 b/d of crude (2.6%) from 370,000 b/d (4%). For 2006, the company previously projected growth of 150,000 b/d (1.6%) but now is predicting that 2006 Russian production is likely to be essentially flat.

"All in all, it is not that surprising that Russian oil production has declined on a sequential basis every month from October 2004 through January 2005 and has only partially recovered since then," said RJA analysts. "Longer term (5-10 years), Russia does have abundant resources that could be exploited and brought to market given proper political conditions.

"Accordingly, we do not believe that Russian oil production has already seen its all-time peak. That said, we think that even 1-3% average growth over the next 3 years is now likely to be overly optimistic. Because this production growth slowdown serves to increase the Organization of Petroleum Exporting Countries' level of control over the oil market, we look at this as a bullish stimulus for oil prices over the next 3-5 years," the analyst said.

Current energy prices
The June contract for benchmark US light, sweet crudes fell by 12¢ to $46.80/bbl on the New York Mercantile Exchange, while the July position retreated by 9¢ to $48.65/bbl.

On the US spot market, West Texas Intermediate at Cushing, Okla., lost 12¢ to $46.81/bbl. Gasoline for June delivery dropped 1.73¢ to $1.42/gal on NYMEX. Heating oil for the same month declined by 1.32¢ to $1.37/gal. The June natural gas contract was down by 1.4¢ to $6.34/MMbtu.

In London, the July contract for North Sea Brent crude gained 15¢ to $48.03/bbl on the International Petroleum Exchange.

The average price for OPEC's basket of seven benchmark crudes gained 62¢ to $45.27/bbl on May 20. So far this year, OPEC's basket price has averaged $45.58/bbl.