By OGJ editors
HOUSTON, June 27 -- Energy futures prices evidenced little change Wednesday in reaction to the expected decision by the Organization of Petroleum Exporting Countries to extend its current production quotas for another 3 months.
With so many OPEC members advocating such a move before Wednesday's meeting, traders had already factored it into their market decisions.
However, many observers expect the cartel will raise its production ceiling in the fourth quarter, as the member energy ministers of Saudi Arabia and Iran have already suggested. Analysts said OPEC will have to confront Russia's increased production to retain market shares by then, especially if world demand for oil proves sluggish as some expect.
Russia curbed its oil exports by 150,000 b/d during the first 6 months of this year in a cooperative effort with OPEC to shore up world prices for crude. But Russian oil companies indicated plans to increase production and exports in the third quarter in a bid to capture some of the market for high sulfur crude now held by Middle Eastern members of OPEC.
Norway also said it will rescind the 150,000 b/d cut in its production that it imposed through the first half of this year in cooperation with OPEC. While acknowledging uncertainties about the strength of the world economic recovery, officials at the Norwegian oil and energy ministry said they expect world demand for oil to increase by 1.5-2 million b/d by the end of this year.
The August contract for benchmark US sweet, light crudes gained 44¢ to $26.76/bbl Wednesday on the New York Mercantile Exchange. The September contract increased by 28¢ to $26.36/bbl. However, the August position dipped to $26.74/bbl in after-hours electronic trading, while September remained unchanged.
Unleaded gasoline for July delivery jumped 1.19¢ to 78.51¢/gal on NYMEX. Heating oil for the same month rose by 0.74¢ to 66.63¢/gal.
However, the expiring July natural gas contract dropped 17.1¢ to $3.28/Mcf in what the online Enerfax Daily described as whipsaw liquidation It reported, "Marketers waited until the end of the session to sell because there wasn't any buyers. It was like everyone had the same sell order."
The US Department of Energy's Energy Information Administration said Thursday that 88 bcf of natural gas was injected into US underground storage facilities last week, up from 81 bcf the previous week but down from 104 bcf during the same period a year ago.
US gas storage now stands at nearly 2.2 tcf, representing a surplus of 416 bcf compared with storage levels of a year ago and 368 bcf above the 5-year average, said Robert S. Morris at Salomon Smith Barney Inc.
In London, the August contract for North Sea Brent oil inched up 4¢ to $25.24/bbl on the International Petroleum Exchange. However, brokers said that market is unlikely to remain about the $25/bbl level for long as Russia steps up its production.
The July natural gas contract dipped by 0.3¢ to the equivalent of $1.89/Mcf on the IPE.
The average price for OPEC's basket of seven benchmark crudes gained 3¢ to $24.64/bbl Wednesday.