MARKET WATCHCrude takes modest loss on NY market

The May contract price for benchmark US crude fell Apr. 4 in the New York market following Iranian President Mahmoud Ahmadinejad's surprise decision to release 15 captive UK Navy personnel as an Easter holiday "gift" to the British people.

Sam Fletcher
Senior Writer

HOUSTON, Apr. 5 -- The May contract price for benchmark US crude fell Apr. 4 in the New York market following Iranian President Mahmoud Ahmadinejad's surprise decision to release 15 captive UK Navy personnel as an Easter holiday "gift" to the British people.

The loss was limited, however, by the Energy Information Administration's report that US gasoline inventories fell for the eighth consecutive week, down 5 million bbl to 205.2 million bbl during the week ended Mar. 30. That draw "was larger than expected, but it includes a correction for a report mistake in [the previous] edition when the stock draw came out less than expected," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. "The correction does not change anything to the current stock level, but we need to keep in mind that when adjusting for the correction we are drawing only at half the weekly pace suggested by [the latest] report," he said.

Commercial US crude inventories registered a larger-than-expected gain of 4.3 million bbl to 332.7 million bbl during the same period. Distillate fuel stocks were unchanged at 118 million bbl (OGJ Online, Apr. 4, 2007).

Meanwhile, Mohamed Al Hamli, energy minister of the UAE and president of the Organization of Petroleum Exporting Countries, said market fundamentals remain solid, signaling no need for any production adjustments by OPEC members.

The eight British sailors and seven marines flew to London from Tehran on Apr. 5. They were seized Mar. 23 in the Persian Gulf by naval units of Iran's Revolutionary Guard after the British personnel finished inspecting a merchant ship for possibly smuggled goods just outside the Shatt al-Arab waterway dividing Iraq and Iran.

British Prime Minister Tony Blair called for continued international pressure on Iran, blaming elements of the Iranian government for backing militants in Iraq where four British soldiers and a translator were slain in an ambush hours before the freed crew touched down. The UK, like the US, is a permanent member of the United Nations Security Council, which is still trying through trade sanctions to force Iran to postpone its nuclear program.

"Despite the release of the British soldiers, multiple international newspapers claim that the US has plans under way to attack Iranian nuclear facilities by the end of the month." said analysts in the Houston office of Raymond James & Associates Inc. "Recall that nearly one quarter of the world's oil flows through the Strait of Hormuz near Iran, and the country is the second-largest producer of OPEC. Any confirmation of these potential attacks could send oil soaring to the levels experienced last summer."

Energy prices
Energy commodity price losses following the Apr. 4 announcement that the British personnel were to be freed were not as great as the price rollbacks Apr. 3 when UK and Iranian officials indicated their willingness to negotiate a release.

The May contract for benchmark US sweet, light crudes traded at $63.56-65.09/bbl before closing at $64.38/bbl, down 26¢ Apr. 4 on the New York Mercantile Exchange. The June contract was unchanged, however, at $66.29/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 26¢ to $64.39/bbl. The May contract for reformulated blend stock for oxygenate blending (RBOB) gained 8.77¢ to $2.11/gal on NYMEX. Heating oil for the same month increased by 2.57¢ to $1.86/gal.

The May natural gas contract escalated by 8.9¢ to $7.52/MMbtu on NYMEX. On the US spot market, however, natural gas at Henry Hub, La., dropped 9.5¢ to $7.46/MMbtu. EIA reported the injection of 58 bcf of natural gas into US underground storage in the week ended Mar. 30, vs. withdrawals of 22 bcf the prior week and 10 bcf during the same period in 2006. US gas storage now stands at nearly 1.6 tcf, down by 127 bcf from year-ago level but 337 bcf above the 5-year average.

In London, the May IPE contract for North Sea Brent crude gained 59¢ to $68.40/bbl. April gas oil increased by $3.75 to $581/tonne.

The average price for OPEC's basket of 11 benchmark crudes declined 42¢ to $63.31/bbl on Apr. 4.

Contact Sam Fletcher at samf@ogjonline.com.

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