Market watch: Energy futures prices remain mixed among war, oil supply worries

Energy futures were mixed Monday as traders continued to worry that the war with Iraq will be more protracted that first anticipated and also upon worries about disruptions of Nigerian production.

April 1, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Apr. 1 -- Energy futures were mixed Monday as traders continued to worry that the war with Iraq will be more protracted that first anticipated and also upon worries about disruptions of Nigerian production.

However, oil prices fell early Monday on the London market with reports that Nigerian oil workers had called off a proposed strike. Some 800,000 b/d of Nigeria's oil production remains shut in, roughly 40% of the country's output, because of escalating political violence in that country (OGJ Online, Mar. 28, 2003).

The latest tanker tracking data "essentially reiterated last week's upward revision" of production among the 10 active members of the Organization of Petroleum Exporting Countries (aside from Iraq) to 26.54 million b/d from 26.3 million b/d previously, said analysts Monday at UBS Warburg LLC, New York.

Despite disruption of Nigeria's production, OPEC members currently are producing in excess of anticipated demand from them for the second quarter. But if Iraqi oil fields remain offline until the end of this year, as coalition officials recently indicated, "then OPEC-10 would have to employ essentially all its capacity to cope" with the estimated fourth quarter call on OPEC, analysts said.

Meanwhile, higher energy prices are reportedly impacting the cost of essential foods and products in Asia.

New York market
The May contract for benchmark US sweet, light crudes gained 88¢ to $31.04/bbl Monday on the New York Mercantile Exchange, while the June contract rose 83¢ to $29.19/bbl. Heating oil for April delivery plunged by 4.01¢ to 79.24¢/gal. Unleaded gasoline for the same month fell 0.95¢ to 94.44¢/gal.

April contracts for petroleum products "only sank" because of the expiration of those contacts, said analysts at Merrill Lynch Global Securities Research & Economics Group, New York. Price volatility is common on the last day of trading for such contracts, they said.

Otherwise, there was "little in the way" of fresh, market-sensitive news, "although we did see scattered wire service reports suggesting the 200,000 b/d of (Iraqi) crude that was moving to Syria (outside the United Nation's oil-for aid program) was interrupted for 'technical reasons,'" said Merrill Lynch analysts. "A briefing we saw last week suggested the pipe was struck by a missile."

The May natural gas contract lost 8.6¢ to $5.06/Mcf on NYMEX. "Monday refused to hold its price under $5/MMbtu. The bounce to stay above $5(/MMbtu) could push the market upward in the days ahead on short covering in what has become an oversold market," said analysts Tuesday at the Enerfax Daily.

They said, "The natural gas market continues to have support; instead of a big washout, it is just seeing a slow erosion. There is no real reason to rally except for short covering."

Other prices
In London, the May contract for North Sea Brent oil gained 83¢ to $27.18/bbl Monday on the International Petroleum Exchange. Brokers said near-term futures prices for oil were unlikely to fall below $26/bbl in that market while fear persists of a crude shortfall that could last into the peak summer season of gasoline demand.

The May natural gas contract gained 4¢ to the equivalent of $2.61/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes dipped by 1¢ to $27.22/bbl Monday.

Contact Sam Fletcher at [email protected]