Market watch: Short covering boosts energy futures prices

A flurry of short covering by traders seeking to cancel out previous sales ahead of new reports on US petroleum inventories pushed up energy futures prices Wednesday on the New York Mercantile Exchange.

May 30, 2002

3 min read

By OGJ editors

HOUSTON, May 30 -- A flurry of short covering by traders seeking to cancel out previous sales ahead of new reports on US petroleum inventories pushed up energy futures prices Wednesday on the New York Mercantile Exchange.

The July contract for benchmark US sweet, light crudes bumped up 49¢ to $25.76/bbl on NYMEX. The August contract also gained 44¢ to $25.87/bbl.

Unleaded gasoline for June delivery advanced 1.36¢ to 77.21¢/gal. Heating oil for the same month was up 1.32¢ to 65.31¢/gal. The June contract for natural gas increased by 14¢ to $3.42/Mcf.

After that market closed Wednesday, the American Petroleum Institute reported US oil inventory fell by 2.36 million bbl to 317.9 million bbl last week, down from 321.98 million bbl during the same period a year ago.

However, gasoline stocks jumped by 2.99 million bbl to 218.4 million bbl last week, while US distillate fuel inventory increased by 2.1 million bbl to 124.38 million bbl. US refineries were operating at 92.3% capacity last week, up from 91.4% the previous week.

Early Thursday, the US Energy Information Administration reported US natural gas storage increased by 71 bcf to 1.79 tcf last week. During the same period last year, there was 1.35 tcf of gas in storage.

In London, the July contract for North Sea Brent crude gained 36¢ to $25.12/bbl Wednesday on the International Petroleum Exchange. The new near-month July natural gas contract dipped by 0.45¢ to the equivalent of $1.81/Mcf on IPE.

The official news agency of the Organization of Petroleum Exporting Countries was closed for a holiday Thursday, so there was no update on the OPEC basket price.

However, there was speculation that Alí Rodríguez Araque planned to lobby for a yet unnamed fellow Venezuelan to succeed him as secretary general of OPEC during a weeklong tour of the Middle East that started Thursday. Rodríguez is stepping down from that position, having served 14 months of a 3-year term before recently being named as the new president of Petroleos de Venezuela SA.

Sources speculated that another Venezuelan candidate might prevent the frequent conflict among Saudi Arabia, Iran, and Iraq for that position.

There's also speculation that other OPEC ministers may ask Rodríguez about reports that PDVSA is increasing its oil production by 150,000-200,000 b/d over its assigned OPEC quota of 2.49 million b/d. OPEC ministers are scheduled to meet June 26 in Vienna to assess market conditions, but several have already indicated they see no need to increase oil production.