Market watch: Energy futures prices continue to weaken

Energy futures prices generally declined Monday as markets awaited fresh news on war or weather possibilities that could stir new movement. Meteorologists are predicting below-normal temperatures for the eastern half of the US this week, with temperatures in the Northeast expected to be well below normal.


By OGJ editors

HOUSTON, Nov. 5 -- Energy futures prices generally declined Monday as markets awaited fresh news on war or weather possibilities that could stir new movement.
Meteorologists are predicting below-normal temperatures for the eastern half of the US this week, with temperatures in the Northeast expected to be well below normal. Thermometer readings in the Rockies should be slightly above normal, with normal temperatures expected west of the Rockies.
However, traders shrugged off those forecasts, along with reports that the US may call up military reserve units in preparation for possible military action against Iraq. There apparently is little expectation among traders that the US will take unilateral action against Iraq.
The December contract for benchmark US light, sweet crudes dropped 18¢ to $26.95/bbl on the New York Mercantile Exchange, while the January position fell 27¢ to $26.44/bbl. Heating oil for December delivery dipped 0.83¢ to 73.33¢/gal. However, unleaded gasoline for the same month rose 0.98¢ to 77.43¢/gal because of unusually low US inventories.
The December natural gas contract plunged 19.7¢ to $3.86/Mcf on NYMEX. That price drop "means that technical indicators have likely turned negative," analysts said Tuesday at Enerfax Daily. "Weather is still the key, however, and if we get more cold weather, it will head back higher. Look for technical support at $3.76(/Mcf), and resistance at $4-4.05(/Mcf)."
However, Scott De Pasquale, natural gas analyst at Boston-based Energy Security Analysis Inc., said Monday, "Strong technical signals coming from the bullish channel that has developed since the winter of 2000-01 indicate that before the end of the year, technical trading could take prompt month (natural gas position) beyond $4.45/MMbtu resistance."
He said, "Sooner or later, we expect fundamentals—high storage levels, forecasted mild winter temperatures—to overwhelm price levels. This pull is likely to occur toward the end of December and carry into January and February." ESAI predicts gas prices "could come off hard in the New Year, pushing well below $3/MMbtu by March."
While the outlook for first quarter 2003 is bearish, ESAI officials said, a military invasion of Iraq during that same time period could limit any gas market downside through crude market volatility.
In London, the December contract for North Sea Brent oil lost 39¢ to $25.02/bbl on the International Petroleum Exchange. With market sentiment now more bearish, brokers said, IPE oil prices likely will soon fall below the $25/bbl price level. At what level it might stop then, they said, is unclear.
Meanwhile, the December natural gas contract dropped 4.4¢ Monday to the equivalent of $3.71/Mcf on the IPE.
The average price of the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 29¢ to $25/bbl Monday.

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