Market watch: Oil futures prices plummet in post-holiday profit taking

By OGJ editors

HOUSTON, July 9 -- Futures prices for oil and petroleum products plummeted Monday in New York and London as traders took profits from what was described as an inflated market after US government warnings of a possible terrorist attack failed to materialize over the long Fourth of July weekend.

Market fundamentals were ignored as technical sell signals kicked in, pushing prices lower, analysts said. However, London brokers said oil futures prices in that market should stabilize around $25/bbl if the American Petroleum Institute's weekly report on US inventories of crude and petroleum products proves "constructive." That report is scheduled for release late Tuesday.

Meanwhile, mild weather and high storage levels pushed down natural gas futures prices to levels not seen since March on the New York Mercantile Exchange. The August natural gas contract plunged 20.3¢ to $2.64/Mcf, while the September contract dropped 19¢ to $2.93/Mcf. That sell off apparently was triggered when increased gas demand and higher power prices, anticipated by traders as a result of warmer weather in the Northeast, failed to materialize.

The US gas market "still has lower to go," Enerfax Daily reported, with Monday's low of $2.93/Mcf likely to be tested again and support seen at $2.85/Mcf. "However," it said, "the market is oversold on a short-term basis, so a bounce upward driven by short-covering could bring the price back" above $3/Mcf.

Spot market sales of natural gas generally were reduced by 10-15¢/Mcf Monday across the US and Canada. Gas for next day delivery at Henry Hub lost 11¢ to $3.06/Mcf, Enerfax Daily said.

The August contract for benchmark US sweet, light crudes dropped 73¢ to $26.07/bbl Monday on NYMEX, while the September contract lost 60¢ to $26.08/bbl.

Unleaded gasoline for August delivery fell 2.64¢ to 76.14¢/gal. Heating oil for the same month was down 1.97¢ to 66.8¢/gal.

In London, the August contract for North Sea Brent fell 65¢ to $25.08/bbl on the International Petroleum Exchange. However, the August natural gas contract inched up 3.9¢ to $2.18/Mcf on IPE.

The average price of the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined by 38¢ to $24.62/bbl Monday.

Alvaro Silva Calderon, Venezuela's minister of energy, reiterated that securing support from independent oil-producing countries would be a top priority in his new position as secretary general of OPEC.

"We have achieved important steps forward in this regard. We now have eight independent producers sitting at the table as observers (at OPEC meetings)," he said. "Talking with them on the importance of rationalization (of markets) and the dialog between producers and consumers is a priority."