Market watch: Rumored OPEC breakup tanks energy futures prices

By OGJ editors

HOUSTON, July 23 -- Rumors that Nigeria was preparing to abandon membership in the Organization of Petroleum Exporting Countries and boost its oil production beyond its previous quota caused oil futures prices to plummet Monday, despite strong denials by Nigerian government and oil industry officials.

Senior officials in Nigeria's petroleum ministry Monday dismissed as "pure speculation" a Sunday report in The Independent, a London publication, that Nigeria could threaten to resign from the group "as soon as the next OPEC meeting in September."

However, the rumor not only persisted but also expanded to include Venezuela, whose former energy minister, Alvaro Silva Calderon, was just named OPEC's new secretary general at its most recent meeting. Silva succeeded Alí Rodríguez Araque, who was recently named president of Petroleos de Venezuela SA, Venezuela's state oil company.

Both Rodríguez and Silva in recent weeks have denied any plans for a drastic boost in Venezuela's current production and reiterated their support of OPEC's efforts to restrict its members' oil production in order to push up world crude prices. Rafael Ramirez Carreño echoed their stand when he was sworn in Friday as Venezuela's new minister of energy and mines.

Still, OPEC's official news agency reported Tuesday, "Conspiracy theorists maintained that OPEC was on the verge of collapse because member states were unhappy with production quotas, and others might opt to leave the organization soon."

The latest speculation about OPEC's pending demise is as wrong now as the many similar reports of the past, industry analysts said Tuesday. They said traders read too much into Monday's rumors and predicted a sharp recovery in energy prices Tuesday after the markets calmed.

Meanwhile, the August contract for benchmark US sweet, light crudes plunged $1.23 to $26.60/bbl Monday on the New York Mercantile Exchange. The September contract also fell, by $1.14 to $26.70/bbl.

Heating oil for August delivery plummeted by 3.03¢ to 67.11¢, while unleaded gasoline for the same month was down 2.72¢ to 81.14¢/gal. The August natural gas contract registered the only gain, up 1.4¢ to $2.95/Mcf on NYMEX.

In London, the September contract for North Sea Brent oil fell $1.01 to $25.42/bbl on the International Petroleum Exchange. Brokers said oil prices in that market appear "technically weak" and unlikely to recover "in the very near term."

However, the August natural gas contract gained 0.97¢ to the equivalent of $1.98/Mcf on the IPE.

The average price for the OPEC basket of seven benchmark crudes fell by 67¢ to $25.23/bbl Monday.