MARKET WATCHEnergy futures drop across the board Monday in New York
By OGJ editors
HOUSTON, May 20 -- Crude oil, natural gas, and refined product futures prices all dropped in New York Monday. Gas prices rallied briefly after opening upon concerns about a Michigan nuclear unit outage, but the market failed to sustain the rally all day.
American Electric Power Co. Inc. reported cracks on the reactor vessel head of its Cook 2 unit during a refueling outage. AEP had started refueling the 1,090 Mw plant on May 5, and the outage was scheduled to last 35 days.
By midday, gas futures prices had started downward after AEP said repairs could be made on the vessel head without extending the scheduled refueling outage.
Meanwhile, AEP expects to return the 1,035 Mw Unit 1 to service by May 31. Both units were shut since late last month when fish clogged the plant's cooling water intake system. The plant is 11 miles south of Benton Harbor, Mich.
Oil prices have been declining since early March, which traders and analysts attribute to less war damage resulting to Iraqi oil wells and infrastructure than many had feared before the US-led attack.
Tyler Dann, Banc of America Securities LLC analyst, said the stock prices of integrated oil companies generally have rallied since the war although the integrated companies' stock price improvement still lags the broader market.
Dann said long-term investor oil price expectations are just under $21/bbl for West Texas Intermediate crude.
"We're incrementally more inclined to embed our high-end, long-term oil price scenario of $24/bbl rather than our low-end scenario of $18/bbl into sector valuations over the next 12 months, consistent with 36-month commodity futures market expectations and the prospect for a slower-than-previously-expected production ramp out of Iraq," he said.
US officials originally suggested two-thirds of Iraqi oil production might be restored by the middle of June, but Iraqi oil officials told Reuters news service this week that the anticipated production increase had been pushed back for more than a month because of looting and insecurity at the oil fields.
Market prices
The June contract for benchmark US light, sweet crudes pulled back 31¢ to $28.83/bbl Friday on the New York Mercantile Exchange, while the July contract dropped by 46¢ to $28.29/bbl. Unleaded gasoline for June delivery dropped by 2.51¢ to 85.39¢/gal. Heating oil for the same month slipped by 2.64¢ to 72.92¢/gal.
The June natural gas contract dropped by 10.7¢ to $6.015/Mcf Monday on NYMEX after trading rallied to $6.43/Mcf before dropping to a low of $5.99/Mcf and then rebounding slightly before the close.
In addition to the nuclear plant news, analysts at Enerfax Daily said mild weather combined with the upcoming Memorial Day holiday weekend could send gas prices down for the short term, but bullish fundamentals remain in place for the long term.
"A break of $5.95(/Mcf) support (Tuesday) could send the market sliding to $5.65(/Mcf) in a hurry," Enerfax said before trading opened for the day.
In London, the June contract for North Sea Brent oil declined 49¢ to $25.61/bbl Monday on the International Petroleum Exchange. The day's high was $26.50/bbl and the low was $25.41/bbl.
The June natural gas contract jumped by 15¢ to the equivalent of $2.92/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes climbed 29¢ to $26.53/bbl Monday.