Market watch: Fears of increased OPEC production push down energy prices
Energy futures prices fell Wednesday as traders worried that active members of OPECwho earlier pledged to offset any oil shortage caused by US war with Iranmay increase production quotas next month.
By OGJ editors
HOUSTON, Aug. 29 -- Energy futures prices fell Wednesday as traders worried that active members of the Organization of Petroleum Exporting Countries—who earlier pledged to offset any oil shortage caused by US war with Iran—may increase production quotas next month.
Reports by both the US Department of Energy and the American Petroleum Institute that US oil inventories increased for the second consecutive week also were a factor, as oil prices on the New York Mercantile Exchange fell back to mid-August levels at the start of the recent rally.
DOE officials reported early Wednesday that US oil inventories increased by 300,000 bbl last week, while gasoline stocks declined by 1.9 million bbl and distillate stocks were down 1.8 million bbl. In its report late Tuesday, API said US oil stocks were up 2.9 million bbl last week, while gasoline and distillate inventories declined by 2.1 million bbl and 1.1 million bbl, respectively.
The October contract for benchmark US sweet, light crudes dropped 49¢ to $28.34/bbl on NYMEX. The November position also declined, down 37¢ to $28.23/bbl. Unleaded gasoline for September delivery fell 1.62¢ to 80.18¢/gal. Heating oil for the same month lost 0.56¢ to 74.45¢/gal.
The expiring September position for natural gas plunged 19.5¢ to $3.29/Mcf Wednesday, "as trade and locals liquidated holdings" in the usual volatile trading at the close of a contract, analysts at Enerfax Daily reported Thursday. The October contract lost 12.8¢ to $3.40/Mcf, while the November position slipped 11.1¢ to $3.67/Mcf.
Early Thursday, the US Energy Information Administration reported natural gas injections into US underground storage totaled 59 bcf last week, compared with 37 bcf the previous week and 74 bcf during the same period a year ago. The latest injection figure exceeded Wall Street's expectations. US gas storage now exceeds 2.7 tcf, up 216 bcf from a year ago and 307 bcf above the 5-year average.
In London, the October contract for North Sea Brent oil dropped 27¢ to $26.95/bbl on the International Petroleum Exchange. However, brokers said oil prices likely will rally again after this latest correction.
The September contract for natural gas lost 1.7¢ to the equivalent of $1.94/Mcf on the IPE.
The average price for OPEC's basket of seven benchmark crudes dropped 40¢ to $26.27/bbl Wednesday.