Sam Fletcher
Senior Writer
HOUSTON, Aug. 12 -- Futures prices for oil and petroleum products continued to slip in profit taking Monday, but natural gas prices climbed higher on the New York Mercantile Exchange, with predictions of hotter weather later this week in the Northeastern US.
However, some traders expect natural gas prices to retreat prior to the US Energy Information Administration's next report Thursday on US gas storage.
Energy futures prices
The September natural gas contract gained 9.2¢ to $5.13/Mcf Monday on NYMEX, while the October position increased by 9.1¢ to $5.18/Mcf. Other months ended mixed.
"While warmer Northeast forecasts for later this week are seen as supportive, many traders see only limited upside," analysts said Tuesday at Enerfax Daily.
Although the market's surge past key resistance to more than $5/Mcf levels last Thursday may have set the stage for additional increases, it was unable to close above the 40-day moving average around $5.21/Mcf Monday to "confirm the near-term bullish scenario," analysts said.
The September and October contracts for benchmark US sweet, light crudes declined Monday by 17¢ each to $32.01/bbl and 31.90/bbl, respectively, on NYMEX. Unleaded gasoline for September delivery fell by 1.45¢ to 94.05¢/gal. Heating oil for the same month was down 0.79¢ to 83.54¢/gal.
Trading volume was lower than usual, with participants apparently looking for bearish signals, analysts said.
In London, the September contract for North Sea Brent oil declined by 8¢ to $29.91/bbl on the International Petroleum Exchange. The September natural gas contract inched up by 0.16¢ to the equivalent of $2.50/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 20¢ to $29.02/bbl Monday.
Oil demand increases
Brokers said technical selling in the IPE oil futures market Monday outweighed a report by the International Energy Agency, Paris, that increased previous predictions for world oil demand growth by 100,000 b/d to 1.11 million b/d in 2003. Predicted demand growth for 2004 remains unchanged at 1.05 million b/d.
China's sooner-than-expected recovery from the Severe Acute Respiratory Syndrome (SARS) virus epidemic and its impact on that country's economy is largely responsible for the revised forecast of the increased growth in oil demand, said IEA.
Meanwhile, Energy Security Analysis Inc. (ESAI) in Wakefield, Mass., reported in the latest edition of its Pacific Basin Stockwatch that global crude demand surged in the first half of this year, mostly as a result of gains in the Asia-Pacific region. Demand will likely continue increasing through the rest of 2003, keeping the market tight, ESAI said.
"Global crude oil demand is set to grow at its fastest rate since 1997 this year," said Aaron Brady, senior analyst. ESAI projects the growth rate will double that of 2001, with demand in the Asia-Pacific market being a major factor.
At the same time, ESAI sees US and European crude demand staging a comeback from last year, as refiners on both sides of the Atlantic basin run at high utilization rates in order to rebuild depleted inventories of gasoline and middle distillates.
"It looks increasingly likely that the US market will enter the heating season with a deficit in distillate inventories, and this will tend to support West Texas Intermediate crude prices," said Brady. In the meantime, with its refineries running at elevated levels, the US will have difficulty building its crude stocks unless oil imports can consistently remain above 10 million b/d, ESAI said.
Contact Sam Fletcher at [email protected]