MARKET WATCHViolence in Iraq pushes crude futures prices to new records
Sam Fletcher
Senior Writer
HOUSTON, Aug. 13 -- Crude futures prices soared to new highs Thursday as US troops assaulted militia loyal to Shiite cleric Muqtada al-Sadr after a week-long uprising in the shrine city of Najaf, Iraq.
Traders also worried about the possible disruption of oil exports from Venezuela where President Hugo Chavéz faces a recall referendum Sunday that may trigger civil disturbances.
However, sharp losses continued in the natural gas futures market as two storms veered away from the key gas production area in the Gulf of Mexico. The US Minerals Management Service in New Orleans said Friday that 48 platforms and 23 rigs were evacuated in the gulf ahead of Tropical Storm Bonnie and Hurricane Charley. A total of 313,664 b/d of crude and 910.3 MMcfd of natural gas were shut in as a result, the equivalent of 18.45% of the oil and 7.4% of the natural gas produced daily from the Gulf of Mexico. However, crews were reported returning to offshore facilities late Thursday.
Energy prices
The September contract for benchmark US light, sweet crudes jumped by 70¢ to $45.50/bbl after earlier touching an all-time high of $45.75/bbl Thursday on the New York Mercantile Exchange. It marked the seventh record-high settlement for the front-month NYMEX crude contract in 3 weeks. Meanwhile, the October contract advanced by 58¢ to $44.93/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also gained 70¢ to $45.50/bbl.
Gasoline for September delivery soared by 3.59¢ to $1.2981/gal Thursday on NYMEX. Heating oil for the same month was up by 2.04¢ to $1.191/gal. However, the September natural gas contract plunged by 17.2¢ to $5.44/Mcf Thursday, "continuing Wednesday's sharp losses as the market fell more than 3%," said analysts Friday at Enerfax Daily.
"Back-month futures [contact prices] also fell but less than the front month, increasing the contango pricing [in which prices in succeeding delivery months are progressively higher than in the nearest delivery month] that exists through the winter 2004-05 months," the analysts said. "The spread between September and January futures is now more than $1.40[/Mcf], an unusually high level that provides a strong financial incentive to store natural gas now and hedge it by selling back-month futures," they said.
In London, the September contract for North Sea Brent crude climbed by 72¢ to $42.29/bbl on the International Petroleum Exchange. Gas oil for Aug. delivery was unchanged at $371/tonne. The September natural gas contract slipped by 2.4¢ to the equivalent of $3.84/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes continued to escalate Thursday, up by 68¢ to $40.76/bbl. The all-time record price for OPEC's basket of crudes was $41.80/bbl on Nov. 20, 1980 (OGJ Online, Aug. 10, 2004).
Contact Sam Fletcher at [email protected]