HOUSTON, Jan.12 -- Crude futures prices hit a 3-month high Jan. 11 in the New York market as traders' concerns about possible political fallout over Iran's nuclear program overrode an early selloff triggered by a bearish government report on US energy stocks.
UK officials proposed Jan. 11 that the UN Security Council consider taking action against Iran if it resumes nuclear fuel research.
"The issue of Iran's international relations continues to rise to the fore as a major potential area of market concern," said Paul Horsnell of Barclays Capital Inc., London. "It now seems likely that the EU3 of Germany, UK, and France will later this week abandon the mothballed talks with Iran."
In a Jan. 11 report, Horsnell said: "There are elements within the Iranian government that see the oil market situation as an insulation that allows them [to] push harder. With other countries tied down in Iraq, and with the oil market existing on a wafer of spare capacity, that faction argues that the consequences of any interruption of Iranian exports could be so severe as to lead others to shy away from any meaningful response. Much depends on whether or not that is a miscalculation, and we continue to see Iran as representing a severe upside risk for prices this year."
The US Energy Information Administration earlier Jan. 11 reported commercial US crude inventories dropped by 2.9 million bbl to 318.7 million bbl during the week ended Jan. 6. Gasoline stocks jumped by 4.5 million bbl to 208.8 million bbl in the same period. Distillate fuel inventories shot up by 4.9 million bbl to 133.8 million bbl (OGJ Online, Jan. 11, 2005).
Meanwhile, the US Minerals Management Service said 100 production platforms are still idle in the federal waters of the Gulf of Mexico. It reported shut-in production amounted to 396,786 b/d of crude and 1.8 bcfd of natural gas, as of Jan. 11. Cumulative production lost from federal leases in the gulf since Aug. 26 exceeded 114 million bbl of crude and 583.3 bcf of natural gas, officials said.
The February contract for benchmark US sweet, light crudes hit $64.80/bbl in intraday trading Jan. 11, a 3-month high for a front-month contract, before closing at $63.94/bbl, up 57¢ for the day on the New York Mercantile Exchange. The March contract gained 35¢ to $64.45/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 57¢ to $63.95/bbl.
Heating oil for February delivery increased by 1.08¢ to $1.73/gal while gasoline for the same month dipped by 0.4¢, also to $1.73/gal. The February natural gas contract lost 9.8¢ to close at $9.24/MMbtu after trading as low as $9.08/MMbtu during the session.
"High temperatures across the northern US decreased demand," said analysts at Enerfax Daily. Front-month natural gas prices "have plunged 41% from the $15.78[/MMbtu] all-time high reached less than a month ago," they said.
In London, the February contract for North Sea Brent crude gained 25¢ to $62.17/bbl on the International Petroleum Exchange. Gas oil for January lost $11.75 to $510.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes declined by 24¢ to $56.87/bbl on Jan. 11.
Contact Sam Fletcher at [email protected]