Market watch: Energy futures price rally continues
By OGJ editors
HOUSTON, June 18 -- The energy futures markets in New York and London continued to rally Monday on the momentum triggered last Wednesday by reports of declines in US petroleum inventories during the previous week.
The markets got an additional boost from remarks by Amer Mohammed Rasheed, Iraq's oil minister, who indicated that country might again disrupt its oil exports because of disagreements with rules imposed by the United Nations on the UN-administered oil-for-aid program.
Yet noncommercial traders of crude contracts on the New York Mercantile Exchange further reduced their exposure to that market, despite "the modest support of last week's US oil inventory data," said financial analyst Matthew Warburton with UBS Warburg LLC, New York.
"The noncommercials decreased their delta adjusted futures and options net long position by 16,451 contracts to 5,224 contracts," he reported Monday. "The noncommercial net long position is the lowest since early February when they reversed their previous net short position."
Warburton reported commercial traders decreased their net short position by 17,512 contacts to 5,836 contracts, also the lowest level since February.
With any new direction of the oil market likely to remain limited prior to the June 26 meeting of the Organization of Petroleum Exporting Countries in Vienna, he said, "We would expect the noncommercial traders to maintain their essentially neutral market position in the near term."
Like virtually everyone, Warburton accepts the statements by many OPEC ministers that no increase in the group's production quota is likely at the June meeting. However, he said a production hike is "increasingly likely" at the next OPEC meeting Sept. 18.
Even without a formal increase in OPEC's current production quota, Warburton said, the latest tanker tracking data indicate the 10 active OPEC members, minus Iraq, unofficially increased their May production to 23.15 million b/d in May from 22.75 million b/d in April.
The July contract for benchmark US sweet, light crudes increased by 15¢ Monday to $26.09/bbl on NYMEX. The August contract also added 20¢ to $26.34/bbl. However, both declined in after-hours electronic trading to $25.97/bbl and $26.23/bbl, respectively.
Unleaded gasoline for July delivery advanced by 0.4¢ to 79.1¢/gal, while heating oil for the same month was up 0.09¢ to 66.49¢/gal on NYMEX. The July natural gas contract inched up 3.5¢ to $3.38/Mcf.
In London, the August contract for North Sea Brent oil gained 25¢ to $25.24/bbl, while the September position was up 12¢ to $25.30/bbl on the International Petroleum Exchange. However, the July natural gas contract slipped by 2.3¢ to the equivalent of $1.78/Mcf on the IPE.
The average price for OPEC's basket of seven benchmark crudes increased Monday by 30¢ to $24.18/bbl.