MARKET WATCHOil prices fall as peace prospects improve in Iraq

Crude futures prices fell Thursday for the fifth consecutive trading session on the New York Mercantile Exchange after Iraq's most senior Shiite Muslim cleric arrived in Najaf to try to end a militia uprising in that city.

Aug. 27, 2004

2 min read

By OGJ editors
HOUSTON, Aug. 27 -- Crude futures prices fell Thursday for the fifth consecutive trading session on the New York Mercantile Exchange after Iraq's most senior Shiite Muslim cleric arrived in Najaf to try to end a militia uprising in that city.

The prospect that peace might come to a portion of Iraq was enough to cause traders to continuing selling positions in the crude futures market, on the assumption that cessation of armed hostilities will help secure Iraq's crude production and exports.

However, some analysts claimed the fall in crude prices since expiration of the September NYMEX contract indicates that the previous price escalation was more the result of speculation than of market fundamentals of supply and demand.

The October contract for benchmark US light, sweet crudes declined by 37¢ to $43.10/bbl Thursday on NYMEX, while the November position was down by 40¢ to $42.75/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., lost 42¢ to $43.10/bbl Thursday.

Gasoline for September delivery jumped by 3.14¢ to $1.1632/gal Thursday on NYMEX. However heating oil for the same month dipped by 0.3¢ to $1.1401/gal.

The September natural gas contract lost 10.9¢ to $5.19/Mcf on NYMEX after the US Energy Information Administration reported Thursday the injection of 90 bcf of natural gas into US underground storage during the week ended Aug. 20.

That injection exceeded Wall Street's expectations and was up from 78 bcf the previous week and 53 bcf during the same period last year.

EIA also reported a negative revision of 6 bcf in underground storage levels as a result of the recent explosion and fire at Duke Energy Gas Transmission's Moss Bluff natural gas storage cavern No.1 in Liberty County, Tex. (OGJ Online, Aug. 26, 2004). US gas storage now stands at 2.6 tcf, up by 262 bcf from year-ago levels and up by 165 bcf from the 5-year average.

In London, the October contract for North Sea Brent crude lost 35¢ to $40.33/bbl Thursday on the International Petroleum Exchange. Gas oil for September fell by $17 to $361.75/tonne. However, the September natural gas contract inched up by 1.3¢ to the equivalent of $4.46/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes fell by $1.43 to $39.02/bbl Thursday.