MARKET WATCH: Crude, products prices continue to climb

Sam Fletcher
Senior Writer

HOUSTON, Aug. 27 -- Futures prices for crude and petroleum products continued to recover Aug. 24 on reports of a 2.8% increase in US new home sales and a 5.9% improvement in US durable goods sales through July.

However, the front-month crude contract finished the week with a 1% loss overall as Petroleos Mexicanos reported no major damage by Hurricane Dean to the Mexican oil company's oil and gas facilities in the Bay of Campeche.

"We should not see Hurricane Dean's impact on supply before next week," said analysts at the Société Générale Group in Paris. "Only a few refineries [along the US Gulf Coast] cut [production] rates due to the interruption in Mexican crude imports."

Analysts in the Houston office of Raymond James & Associates Inc. said the front-month contract price for natural gas was down more than 5% in premarket trading Aug. 27 "as we trend closer and closer to full storage." They said, "While gas has been hammered since news that Hurricane Dean would miss the northern Gulf of Mexico, oil has stayed relatively flat and is trading slightly higher [Monday] morning above $71.25/bbl."

Meanwhile, Iran's oil minister said his country will oppose any proposed increase in production by the Organization of Petroleum Exporting Countries at the group's September meeting.

Robert S. Morris, Banc of America Securities LLC, New York, noted, "Natural gas prices were hit particularly hard after Hurricane Dean failed to disrupt production in the Gulf of Mexico and as cooler temperatures permeated much of the country, especially the Northeast." He said, "We still believe that domestic 'working gas' storage could theoretically reach 3.8 tcf, although this is unlikely to occur this year for a host of reasons."

Energy prices
The October contract for benchmark US light, sweet crudes gained $1.26 to $71.09/bbl Aug. 24 on the New York Mercantile Exchange. The November contract increased $1.13 to $70.69/bbl. On the US spot market, West Texas Intermediate was up $1.35 to $71.39/bbl. The September contract for reformulated blend stock for oxygenate blending (RBOB) escalated by 5.82¢ to $1.98/gal on NYMEX. Heating oil for the same month was up 3.62¢ to $2/gal.

The September natural gas contract lost 9.9¢ to $5.52/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 9.5¢ to $5.71/MMbtu.

In London, the October IPE contract for North Sea Brent crude increased by 76¢ to $70.62/bbl. The September gas oil contract gained $4.50 to $620/tonne.

The average price for OPEC's basket of 11 reference crudes advanced 52¢ to $67.52/bbl on Aug. 24. So far this year, OPEC's basket price has averaged $62.24/bbl, up from an average $61.08/bbl for all of 2006.

Contact Sam Fletcher at [email protected].