MARKET WATCH Geopolitical problems push up energy prices

Jan. 20, 2006
The crude futures price in the New York market shot up to a 4-month high of nearly $67/bbl on Jan. 19.

Sam Fletcher
Senior Writer

HOUSTON, Jan.20 -- The crude futures price in the New York market shot up to a 4-month high of nearly $67/bbl on Jan. 19 following renewed threats against the US by the terrorist group Al-Qaida and continued threats to supplies from Nigeria and Iran.

Royal Dutch Shell PLC has shut in production of 221,000 b/d in the wake of attacks on its facilities in the Niger Delta of Nigeria. Other foreign operators—Chevron Corp., ENI SPA, Total SA, and ExxonMobil Corp.—said they have not yet been attacked, however.

Worry about Iranian supplies came from the possibility that the United Nations might apply sanctions against the Islamic Republic in response to its resumption of nuclear research.

Renewed concerns about possible supply disruptions had more effect on markets than a Jan. 19 report by the Energy Information Administration that US stocks of crude climbed by 2.7 million bbl to 321.4 million bbl during the week ended Jan. 13. Gasoline inventories jumped by 2.8 million bbl to 211.6 million bbl in the same period, and distillate fuel stocks increased by 900,000 bbl to 134.7 million bbl (OGJ Online, Dec. 19, 2006).

Energy prices
The February contract for benchmark US light, sweet crudes jumped by $1.10 to $66.83/bbl Jan. 19 on the New York Mercantile Exchange. The March contract gained 94¢ to $67.19/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.10 to $66.84/bbl. Gasoline for February delivery inched up by 0.27¢ to $1.78/gal. Heating oil for the same month increased by 4.14¢ to $1.80/gal.

The February natural gas contract rose by 21.1¢ to $8.91/MMbtu on NYMEX. "The market followed crude oil higher on geopolitical anxieties despite mild weather over most of the nation and diminished demand," said analysts at Enerfax Daily.

The National Weather Service now sees an equal chance that temperatures may be above or below normal in New England during February. Forecasters said February temperatures should be above normal in the mid-Atlantic states, much of the Northeast, and most of the Great Lakes area.

In London, the March contract for North Sea Brent crude was up by $1.04 to $65.23/bbl. However, gas oil for February lost $2.25 to $546.25/tonne on the International Petroleum Exchange.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dipped by 16¢ to $59.26/bbl on Jan. 19.

Contact Sam Fletcher at [email protected].