MARKET WATCHCrude futures price falls below $70/bbl

Crude futures prices fell below $70/bbl Aug. 29 to the lowest close for a front-month contract in more than 2 months on the New York market as Tropical Storm Ernesto veered toward Florida and away from the bulk of oil and gas production facilities in the Gulf of Mexico.

Aug. 30, 2006

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Aug. 30 -- Crude futures prices fell below $70/bbl Aug. 29 to the lowest close for a front-month contract in more than 2 months on the New York market as Tropical Storm Ernesto veered toward Florida and away from the bulk of oil and gas production facilities in the Gulf of Mexico.

"Oil prices appear to have shifted focus from Tropical Storm Ernesto to Iran's [United Nations] deadline that expires Aug. 31," said analysts in the Houston office of Raymond James & Associates Inc. "Last week, Tehran rejected an offer to stop uranium enrichment, and its case will be debated by the Security Council shortly after the deadline lapses."

Crude futures prices were up in early trading Aug. 30 "on the expectation that Iran will ignore the deadline and sanctions may be imposed as a repercussion," said Raymond James analysts. Others, however, think the UN Security Council's unity against Iran's uranium-enrichment program is cracking and will weaken the UN's response. Iranian President Mahmoud Ahmadinejad said Aug. 29 it is "unlikely" the UN will take action against Iran.

US inventories
On Aug. 30, the US Energy Information Administration reported commercial US crude inventories gained 2.4 million bbl to 332.8 million bbl during the week ended Aug. 25. Gasoline stocks increased by 400,000 bbl to 206.2 million bbl in the same period. Distillate fuel inventories rose by 1.3 million bbl to 136.8 million bbl; ultralow-sulfur diesel accounted for most of that gain, while heating oil inched higher by 300,000 bbl.

Imports of crude into the US jumped by 956,000 b/d to 11.2 million b/d—the second largest weekly average ever, EIA said. Input of crude into US refineries increased by 54,000 b/d to 15.8 million b/d with refineries operating at 92.9% of capacity. Gasoline production declined to 9.1 million b/d in the latest week, while distillate fuel production increased to 4.2 million b/d.

Energy prices
The October contract for benchmark US light, sweet crudes dropped 90¢ to $69.71/bbl Aug. 29 on the New York Mercantile Exchange, the lowest closing for a front-month contract since June 20. The November contract lost 87¢ to $70.86/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 90¢ to $69.72/bbl. Heating oil for September delivery on NYMEX declined by 2.27¢ to $1.94/gal. Unleaded gasoline for the same month, however, inched up by 0.61¢ to $1.79/gal.

The expiring September natural gas contract jumped up 34.4¢ to $6.82/MMbtu on NYMEX, a sharp reversal from its previous 5-week low.

In London, the October IPE contract for North Sea Brent crude dropped 96¢ to $69.86/bbl. The September gas oil contract regained $1.75 to $633.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes lost 52¢ to $65.51/bbl on Aug. 29.

Contact Sam Fletcher at [email protected].