MARKET WATCHEnergy futures prices are mixed as OPEC confirms meeting plans for Apr. 24

Energy futures prices were mixed Monday as officials of the Organization of Petroleum Exporting Countries confirmed they will meet Apr. 24 in Vienna to look "at various options and scenarios that will ensure market equilibrium and stable prices for both producers and consumers."

April 15, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Apr. 15 -- Energy futures prices were mixed Monday as officials of the Organization of Petroleum Exporting Countries confirmed they will meet Apr. 24 in Vienna to look "at various options and scenarios that will ensure market equilibrium and stable prices for both producers and consumers."

OPEC Sec. Gen. Alvaro Silva Calderon described the pending session Monday as "a consultative meeting." It was called by OPEC Conference Pres. Abdullah bin Hamad Al Attiyah because of his concerns over the recent sharp decline in oil prices.

The average price for OPEC's basket of seven benchmark crudes gained 39¢ to $25.35/bbl Monday. At the beginning of March, OPEC's basket price was in excess of $33/bbl as a result of speculation on a pending military conflict between US-led coalition forces and Iraq.

"The market remains well supplied at the moment, but this could pose problems in the next few months when demand is projected to fall quite considerably," said Silva Calderon. At their last meeting in March, OPEC ministers left their total production quota unchanged at 24.5 million b/d.

"Some OPEC members are calling for a reduction in output of up to 2 million b/d, while production exceeded current quotas by around 1.5 million b/d in March," Robert S. Morris, Banc of America Securities, New York, said Monday (OGJ Online, Apr. 14, 2003).

Energy prices
The May contract for benchmark US sweet, light crudes gained 49¢ to $28.63/bbl Monday on the New York Mercantile Exchange, but the June position retreated 5¢ to $27.06/bbl. Heating oil for May delivery jumped by 2.3¢ to 74.75¢/gal. Unleaded gasoline for the same month declined 0.13¢ to 84.91¢/gal.

The May natural gas contract increased by 14.1¢ to $5.55/Mcf on NYMEX. Analysts at Enerfax Daily said Monday that gain was triggered by technical buying, in which a sequence of market events trigger automatic trades, and by short-covering—purchases to close out short sales of futures positions not owned by the sellers, who hope to buy them back later at a lower price—as traders anticipated reports this week of another withdrawal of natural gas from underground storage.

Higher prices for crude and heating oil supported the rally in natural gas prices. However, the analysts said, "Lagging cash prices could limit further upside until storage operators pick up the pace of injections and warmer temperatures boost cooling demand."

In London, the May contract for North Sea Brent oil gained 24¢ to $24.99/bbl on the International Petroleum Exchange. Brokers said that market is likely to remain volatile, driven by sudden changes in market sentiment over the near term. The May natural gas contract lost 3¢ to the equivalent of $2.54/Mcf Monday on IPE.

Meanwhile, the UK government said that, effective Jan. 1, 2004, it will eliminate its petroleum revenue tax on new shipments of oil and natural gas through pipeline infrastructure built before 1993. "The elimination of the tax on this 'tariff' income is intended to stimulate development of satellite fields in and around existing infrastructure, as well as encourage transportation of Norwegian gas to the UK," said Morris in his Monday report.

"Although we believe there will be a slight positive impact for companies that own this infrastructure, the potential benefit is still too early to quantify. The primary beneficiaries of this tax cut will be the potential developers of satellite fields," he said.

Contact Sam Fletcher at [email protected]