Market watch: Energy futures prices down on fears of Venezuelan production hike

    June 24, 2002
    Energy futures prices declined Friday, largely on reports that Venezuela would increase its oil production, said industry analysts.

    By OGJ editors

    HOUSTON, June 24 -- Energy futures prices declined Friday, largely on reports that Venezuela would increase its oil production, said industry analysts.

    Two US attorneys specializing in energy project development in Venezuela last week told OGJ that it is "too early to tell" if that country will continue to adhere to the production quota assigned by the Organization of Petroleum Exporting Countries or boost its production to generate needed revenue.

    "It depends in part on how well other OPEC members comply with their assigned quotas," said Jose F. Valdivia, a partner in the Miami office of Hogan & Hartson LLP, the largest law firm based in Washington, DC. "Our sense is that PDVSA (Petroleos de Venezula SA, Venezuela's state oil company) authorities are out to run that company in a profitable manner."

    Miguel A. Zaldivar Jr., another partner in Hogan & Hartson's Miami office, said PDVSA has other means to raise revenues through its downstream and petrochemical operations without having to violate its OPEC oil production quota. "But it's just too early to tell," he said.

    The August contract for benchmark US light, sweet crudes dropped 13¢ to $25.82/bbl on the New York Mercantile Exchange. The September contract was down 18¢ to $25.72/bbl.

    Unleaded gasoline for July delivery declined by 1.39¢ to 75.57¢/gal on NYMEX. Heating oil for the same month lost 1.14¢ to 64.89¢/gal.

    However, the July natural gas contract inched up by 2.1¢ to $3.24/Mcf, "boosted by late short-covering by locals," the Enerfax Daily reported Monday.

    "Weather forecasts today will determine whether physical prices can rise to support any futures rally," it said. Otherwise, it speculated that the market would likely test the $3/Mcf level later this week. "Spreads will dominate the market the closer the July contract gets to expiration," it said.

    In London, the August contract for North Sea Brent oil fell by 32¢ to $24.75/bbl on the International Petroleum Exchange.

    However, the natural gas contract gained 2.4¢ to the equivalent of $1.84/Mcf on IPE.

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