Sam Fletcher
Senior Writer
HOUSTON, Nov. 3 -- Energy futures prices rose Friday as a result of the normal volatility associated with expiration of near-term contracts for petroleum products, as traders covered exposed sales positions prior to the weekend.
That rally continued early Monday on the International Petroleum Exchange in London after Abdullah bin Hamad Al Attiyah, Qatar's energy minister and conference president for the Organization of Petroleum Exporting Countries, said Sunday that group will work to prevent oil prices from falling.
Speaking to reporters following a short meeting of Gulf Cooperation Council oil ministers in Doha, Al Attiyah said he's in continuous contact with Russian Energy Minister Igor Yusufov "who has always stressed his country's support for OPEC's efforts to maintain stable oil price levels that are in the interest of producers and consumers."
Ali I. Naimi, Saudi Arabia's oil minister, also voiced support of OPEC's price range target of $22-28/bbl at the Doha press conference. He said OPEC oil ministers would look at means of keeping oil prices within that range at their next meeting Dec. 4 in Vienna.
'Moderate' expectations
However, Robert S. Morris, Banc of America Securities LLC, New York, said Monday he still expects oil prices to moderate next year and that US natural gas prices also would be "reined in" by a normal-to-mild winter.
He noted that spot market prices for benchmark US crude dropped to a 1-month low last week following reports of a much-larger-than-expected build in US inventories of oil and petroleum products. "This build was underscored by near-record imports, which rose nearly 7% vs. the prior week," Morris said. "At the same time, heating oil demand has been greatly reduced compared [with] what it normally is this time of year due to the mild weather in the US Northeast, which accounts for roughly three-quarters of total US heating oil consumption. Consequently, US crude oil and heating oil supplies rose to the highest level in more than a year."
Although OPEC's latest 900,000 b/d reduction of its production quotas officially went into effect Saturday, the effects of that cut "won't begin to show up in US imports until the second half of December," Morris said.
Energy prices rise
The December contract for benchmark US light, sweet crudes climbed by 64¢ to $29.11/bbl Friday on the New York Mercantile Exchange, reversing the week's losing trend. The January oil contract increased by 58¢ to $28.85/bbl. Heating oil for December delivery jumped by 1.3¢ to 78.58¢/gal Friday on NYMEX. Unleaded gasoline for the same month gained 0.3¢ to 80.34¢/gal.
The December natural gas contract bumped up by 18.3¢ to $4.89/Mcf Friday on NYMEX, "driven by higher crude prices and some short covering ahead of the weekend, despite a crumbling cash [spot gas] market and mild weather forecasts into next week," said analysts Monday at Enerfax Daily.
"The market could be setting up for another significant move down, unless the weather forecast changes soon. The market was oversold and due for a bounce after losing 7% earlier last week," they said.
In London, the December contract for North Sea Brent oil gained 60¢ to $27.70/bbl Friday on IPE. Early Monday, it was trading at $27.90/bbl, up 20¢ from Friday's close.
Prices previously had fallen low enough last week to become attractive to speculators once again, said brokers, and speculation was responsible for a price rally late Friday in that market.
Gas oil for November delivery gained $6 to $251.75/tonne Friday on IPE. The December natural gas contract increased by 7.9¢ to $5.39/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes gained 19¢ to $27.17/bbl Friday. For the whole week, however, the OPEC basket price averaged $27.78/bbl, down from the previous week's revised average of $28.42/bbl.
OPEC revenues increase
So far this year, OPEC's basket price has averaged $27.91/bbl, compared with its average price of $24.36/bbl for all of 2002.
As a result of higher oil prices, Al Shall Economic Consultants in Kuwait estimated that country has earned $10.7 billion from its crude exports in the first seven months of its current fiscal year, through October, up from budgeted projections of $9.9 billion for the full year.
In Iran, a newspaper reported crude oil exports have generated $56.3 billion in revenues during the first 3 years of that country's third 5-year National Development Plan. It said revenues from oil exports are up by more than 61% from targeted levels and indicated an average growth rate of 9.6%/year.
Meanwhile, BP PLC reported that the UAE, Kuwait, and Iraq will continue supplying oil to world markets for more than 100 years at current production rates, while the US, UK, and other western countries are expected to deplete their own crude reserves in 10 years or less.
According to a report Monday by the OPEC news agency, BP officials estimate that UAE has the third largest recoverable crude reserves in the world after Saudi Arabia and Iraq. They estimated UAE's extractable oil reserves at 97.8 billion bbl at the end of 2002, up from only 32.4 billion bbl in 1982.
The BP report puts Iraq's recoverable oil reserves at 112.5 billion bbl, with Kuwait at 96.5 billion bbl. Saudi Arabia's oil reserves were estimated at a whopping 261.8 billion bbl. But at its current production rate of nearly 9 million b/d, officials said, its projected production life is 86 years.
Another recent report said natural gas is likely to replace oil as the main source of treasury income in Qatar within the next few years, as a result of continued development of that resource.
Contact Sam Fletcher at [email protected]
