MARKET WATCH Political concerns push up energy prices

Energy futures prices continued to climb Friday amid concerns of political unrest in Venezuela and statements that the US government has no near-term plans to release oil from the Strategic Petroleum Reserve.

March 8, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Mar. 8 -- Energy futures prices continued to climb Friday amid concerns of political unrest in Venezuela and statements that the US government has no near-term plans to release oil from the Strategic Petroleum Reserve.

US Deputy Energy Sec. Kyle McSlarrow said the administration would release oil from SPR only in an emergency and that current high prices for crude and petroleum products do not constitute an emergency.

Meanwhile, traders fear that continued political strife in Venezuela could disrupt oil supplies from that country.

Chakib Khelil, Algeria's energy minister, blamed political tensions in Venezuela and Iraq, along with near-record low US stocks of gasoline, for the recent run-up in energy prices. Active members of the Organization of Petroleum Exporting Countries should wait until their next scheduled meeting at the end of this month to decide what measures to take, he said.

"If we discover that oil prices are higher because of a shortage in supply, then we would take the right decision," he said.

Some analysts who previously welcomed OPEC's February decision to reduce its production quota by 1 million b/d effective Apr. 1 and to eliminate 1.5 million b/d of overproduction are now blaming the group for prospective tight gasoline supplies this summer. Oil demand in China and the US now is expected by some to surge within a few months

Energy prices rise
The April contract for benchmark US light, sweet crudes jumped by 62¢ to $37.26/bbl Friday on the New York Mercantile Exchange, while the May contract increased by 63¢ to $36.44/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 65¢ to $37.28/bbl Friday.

Gasoline for April delivery shot up by 1.94¢ to $1.13/gal Friday on NYMEX. Heating oil for the same month was up 0.22¢ to 92.53¢/gal. The April natural gas contract inched up by 1.4¢ to $5.44/Mcf Friday on NYMEX, "pressured by a lagging [spot] cash market, mild weather forecasts, and Thursday's bearish inventory report, but another strong run-up in crude oil prices kept sellers cautions," said analysts Monday at Enerfax Daily.

In London, the April contract for North Sea Brent oil gained 46¢ to $33.35/bbl Friday on the International Petroleum Exchange. Gas oil for March delivery inched up by 75¢ to $280/tonne. However, the April natural gas contract dipped by 0.56¢ to the equivalent of $3.82/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 70¢ to $32.75/bbl Friday. For all of last week, however, OPEC's basket price averaged $31.87/bbl, up by $1.26 from the previous week.

So far this year, OPEC's basket price has averaged $30.16/bbl, up from an average $28.10/bbl for all of 2003.

Contact Sam Fletcher at [email protected]