MARKET WATCHOil futures prices sag with lifting of UN sanctions against Iraq
Sam Fletcher
Senior Writer
HOUSTON, May 23 -- Energy futures prices generally declined Thursday as the United Nations Security Council voted 14-0, with Syria absent, to lift international trade sanctions imposed for 13 years against Iraq.
However, unleaded gasoline for June delivery jumped by 2.49¢ to 89.32¢/gal, the sole gainer among near-month commodities on the New York Mercantile Exchange ahead of the 3-day Memorial Day weekend that marks the official start of the peak US summer driving season.
Outlook for Iraq
UN acceptance of the proposal submitted by the US-led coalition to lift trade bans against Iraq also seemed to approve the US plan of occupation, said some analysts. Traders read it as a bearish signal for exportation of Iraqi oil to world markets, increasing supplies during a seasonal period of slackened demand. Some maintain that the first tankers could load Iraqi oil "within weeks."
"However, (Iraqi) sales look to be limited to oil already in storage at Turkey's port of Ceyhan, which is a different kettle of fish than on-going production-related transactions," said Michael Rothman and Steven A. Pfeifer, first vice-presidents at Merrill Lynch Global Securities Research & Economics Group, New York.
They reported early Friday, "The realization this morning that we're still not past internal structural problems limiting export capability is pushing oil prices higher with Brent crude last assessed at plus-35¢/bbl over last night's close." Iraq's current oil production is "still running at less than half of what's needed to satisfy domestic energy requirements," they said.
Thamir Ghadban, the new head of Iraq's oil sector, recently said Iraq is producing 250,000 b/d of crude, compared with exports of more than 2 million b/d prior to the war (OGJ Online, May 19, 2003).
Meanwhile, losses of equipment, personnel, and records, along with continued lack of military security, keep pushing back timetables for restoring Iraqi production, said Paul Horsnell with J.P. Morgan Securities Inc, London (OGJ Online, May 22, 2003).
NYMEX prices
The July contract for benchmark US light, sweet crudes lost 18¢ to $28.85/bbl Thursday on NYMEX, while the August position retreated by 17¢ to $27.98/bbl. Heating oil for June delivery was down 0.38¢ to 74.37¢/gal.
The June natural gas contract fell 16.3¢ to $6.04/Mcf on NYMEX, after the US Energy Information Administration reported Thursday the largest total volumes injected into storage so far this season. EIA said 90 bcf of gas was injected into US underground storage during the week ended May 16. That was up from injections of 72 bcf the previous week and 68 bcf during the same period a year ago.
There is now 990 bcf of gas in US storage, about 35% below the 5-year average of 1.5 tcf of gas and 44% below the 1.7 tcf that was in storage at this time last year, said analysts Friday at Enerfax Daily. "To get to the 3 tcf level in storage by winter, average weekly injections of 84 bcf are needed until then, and that won't likely happen once summer power demand kicks in," they said.
Other prices
In London, the July contract for North Sea Brent oil lost 24¢ to $25.97/bbl in nervous selling Thursday on the International Petroleum Exchange. The June natural gas contract fell by 7.8¢ to the equivalent of $2.76/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes retreated by 11¢ to $26.53/bbl Thursday.
Contact Sam Fletcher at [email protected]