MARKET WATCHNigerian strike stimulates oil futures price rally
By OGJ editors
HOUSTON, July 2 -- Futures prices for oil and petroleum products continued to rally Tuesday, fired by fears of possible disruption of crude exports from Nigeria because of a strike by oil workers in that country.
Disruptions of oil supplies from Nigeria could prove damaging because of current tight inventories of oil and petroleum products in the US and other developed countries. Traders also are worried that government and industry officials may again issue bullish reports on US supplies this week.
The August contract for benchmark US light, sweet crudes gained 21¢ to $30.40/bbl Tuesday on the New York Mercantile Exchange. The September position advanced by 28¢ to $30.05/bbl. Unleaded gasoline for August delivery jumped by 0.9¢ to 88.17¢/gal. Heating oil for the same month was up 0.44¢ to 79.02¢/gal.
However, the August contract for natural gas lost 9.4¢ to $5.32/Mcf on NYMEX. That market was "undermined by a soft physical market, weak economic news, and the prospects of another large storage injection," said analysts Wednesday at Enerfax Daily. "The market opened down and drifted lower all (Tuesday) morning, trading most of the day below $5.30(/Mcf) before closing on the upswing. Look for the market to continue lower this week ahead of the low-demand July 4th holiday."
They also reported, "The Minerals Management Service said a very minimal amount of yearly gas and oil production was shut in by Tropical Storm Bill in the Gulf of Mexico" before that storm came ashore Monday in Louisiana. Some 250 MMcfd of gas was shut in by producers, or less than 2% of the 14 bcfd of gas produced from offshore fields, analysts said.
"On Thursday, look for the US Energy Information Administration to report another large build (of gas in US storage), probably about 95-105 bcf. Thursday will be a short (NYMEX trading) session with the holiday," analysts advised.
In London, oil futures prices at first slumped lower Tuesday on the International Petroleum Exchange as Tropical Storm Bill moved away from the coastline concentration of refineries in Louisiana. Prices had rallied Monday because of traders' fears that the storm could damage or otherwise disrupt those operations.
However, prices rebounded later during Tuesday's trading session, wiping out much of the day's earlier loss as concern increased over the Nigerian strike. As a result, the August contract for North Sea Brent oil closed at $28.31/bbl Tuesday, down just 2¢ for the day after trading at $27.65-28.36/bbl. The August natural gas contract increased by 3¢ to the equivalent of $2.89/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 8¢ to $27.19/bbl Tuesday.