Market watch: Energy futures prices rally with signs of tighter markets

Energy futures prices continued to rally Thursday as recent bullish reports of US inventories of oil and gasoline convinced traders that supplies and demand are more evenly balanced that they previously perceived.

June 14, 2002

2 min read

By OGJ editors
HOUSTON, June 14 -- Energy futures prices continued to rally Thursday as recent bullish reports of US inventories of oil and gasoline convinced traders that supplies and demand are more evenly balanced that they previously perceived.

The gasoline market could tip into a short supply situation this summer if demand proves "as strong as currently expected," said some analysts. The market was technically oversold prior to Wednesday when the rally began, some said. Reports of problems at a few refineries also helped spark the rebound.

Both the July and August contracts for benchmark US light, sweet crudes soared by $1 to $25.64/bbl and $25.87/bbl, respectively, on the New York Mercantile Exchange. Both continued to climb in after-hours electronic trading to $25.80/bbl for July and $26.01/bbl for August.

Heating oil for July delivery jumped by 2.96¢ to 66.03¢/gal on NYMEX. Unleaded gasoline for the same month rose 2.75¢ to 77.85¢/gal.

The July natural gas contract regained 15.4¢ to $3.21/Mcf in what was seen as a technical market reaction to the latest report Thursday morning of US gas storage figures. The US Department of Energy's Energy Information Administration reported 81 bcf of gas was injected into storage last week, boosting the total to 1.97 tcf, up from 1.56 tcf during the same period a year ago.

A continued decline in US gas production and increased electric cooling demand triggered by hot weather will be necessary to burn off the surplus storage, said analysts.

But the current temperature outlook offers little price support, said Ronald Barone of UBS Warburg LLC, New York. "Natural gas spot prices have continued to fall to levels more indicative of the lackluster demand environment and increasing pace of storage injections," he said Friday. "Given pricing trends and overall market dynamics thus far this week (including the outlook for very mild weekend temperatures), we would expect another decrease in the next reported index."

In London, the July contract for North Sea Brent oil gained 55¢ to $24.06/bbl on the International Petroleum Exchange. The August natural gas contract increased by 7.4¢ to the equivalent of $1.94 Thursday on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes added 74¢ to $23.38/bbl.