Market watch: Energy prices mixed as markets await new developments

Energy futures prices were mixed on international markets Monday, as traders awaited possible new developments from the pending expiration of Iraq's oil export agreement and the upcoming meeting of the Organization of Petroleum Exporting Countries in June.

May 22nd, 2001


By the OGJ Online Staff

HOUSTON, May 22 -- Energy futures prices were mixed on international markets Monday, as traders awaited possible new developments from the pending expiration of Iraq's oil export agreement and the upcoming meeting of the Organization of Petroleum Exporting Countries in June.

OPEC members are studying market prices prior to their scheduled June 5 meeting in Vienna. The average price for OPEC's basket of seven crudes increased by 45¢ to $27.37/bbl Monday.

The current oil export agreement between the UN and Iraq will expire June 3. Previous renewals of that agreement often resulted in supply disruptions, and Iraq is again threatening to shut down shipments if UN officials adopt a US proposal to extend controls to overland exports of Iraqi crude to neighboring Jordan and Turkey.

The June contract for benchmark US light, sweet crudes gained 7¢ to $29.98/bbl on Monday on the New York Mercantile Exchange, but the July contract lost 8¢ to $30.26/bbl. In after-hours electronic trading, both contracts declined slightly to $29.95/bbl and $30.25/bbl, respectively.

Unleaded gasoline for June delivery jumped by 3.07¢ to $1.0997/gal on the NYMEX, while home heating oil for the same month gained 0.78¢ to 81.22¢/gal.

The June natural gas contract lost 17.8¢ to $4.11/Mcf. With gas storage injections continuing at a strong pace, storage levels are likely to reach 3 tcf, with perhaps those facilities even being filled, said Robert Morris of Salomon Smith Barney Inc. in his weekly exploration and production report Monday.

That increases the odds that natural gas futures prices will dip below $4/Mcf before next winter, he said.

Although producers consider $3.50/Mcf to be still a strong market price for gas, such a drop will likely spook industry investors, a panel of market experts said Monday at a petroleum leadership and outlook conference in Houston, sponsored by the Gulf Coast section of the Society of Petroleum Engineers.

"In recent months, investors have gotten used to gas prices of $5/Mcf," said James K. Wicklund, managing director of investment research at Dain Rauscher Wessels Inc. "Sometime over the next 4 years, investors will see that US gas prices are going to be around $3.50/Mcf, maybe (rising at times to) $5/Mcf."

However, John Olson, senior vice-president of Sanders Morris Harris Inc., predicted that gas prices "will average closer to $5/Mcf than $3.50/Mcf" in the near term as more gas-fired electric power plants come on stream.

In London, the July contract for North Sea Brent crude inched up 3¢ to $29.42/bbl on the International Petroleum Exchange. But the June natural gas contract lost 14¢ to the equivalent of $3.02/Mcf on the IPE.

More in General Interest