MARKET WATCHOil price hits new highs on future market

Crude futures prices continued to explore new highs, climbing to as much as $43.94/bbl Monday on the New York Mercantile Exchange after US Homeland Security Sec. Tom Ridge warned on Sunday that terrorists could be targeting US sites with car bombs.

Aug. 3, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Aug. 3 -- Crude futures prices continued to explore new highs, climbing to as much as $43.94/bbl Monday on the New York Mercantile Exchange after US Homeland Security Sec. Tom Ridge warned on Sunday that terrorists could be targeting US sites with car bombs.

Meanwhile, an official with Iraq's Northern Oil Co. reported Tuesday that another attack had again damaged a northern pipeline that was ready to resume transportation of crude from the Kirkuk oil fields to the Turkish port of Ceyhan. No details of the attack were immediately available. Iraq currently is producing 2.6 million b/d of crude and exporting 1.7 million b/d through its southern terminals, which are running at capacity (OGJ Online, Aug. 2, 2004).

Purnomo Yusgiantoro, conference president of the Organization of Petroleum Exporting Countries, said this week that members have no extra crude to supply immediately to world markets to reduce the current run-up in prices. "There is no additional supply," Purnomo told reporters in Jakarta. "Minister Naimi has said Saudi Arabia can increase production but they cannot do it immediately," he said, referring to Ali al-Naimi, oil minister for Saudi Arabia, the biggest exporter.

Energy prices
The September contract for benchmark US sweet, light crudes peaked at $43.94/bbl early in Monday's trading session on NYMEX, then fell to $43.82/bbl at closing, still up by 2¢ from Friday's record high finish. The October contract gained 11¢ to $43.16/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., inched up by 3¢ to $43.83/bbl.

However, futures prices for petroleum products declined Monday, with gasoline for September delivery down by 1.87¢ to $1.2862/gal on NYMEX. Heating oil for the same month lost 0.51¢ to $1.155/gal. Although traders were concerned about crude supplies, analysts said, current prices already reflect a built-in "terror premium," which traders cashed in through sales of petroleum products.

The September natural gas contract plunged by 29.9¢, or 5%, to $5.81/Mcf Monday on NYMEX, "pressured by a weak physical market, forecasts for milder weather later in the week after early-week heat, lack of tropical activity [to threaten gas production in the Gulf of Mexico, and] adequate storage," said analysts Tuesday at Enerfax Daily.

In London, the September contract for North Sea Brent crude dipped by 6¢ to $39.97/Mcf Monday on the International Petroleum Exchange. Gas oil for August delivery gained $2 to $372.25/tonne. The September natural gas contract lost 3.7¢ to the equivalent of $3.85/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 35¢ to $39.04/bbl Monday.

Rafael Ramirez, Venezuela's oil minister, said over the weekend that he would move to lift OPEC's price band at the group's September meeting. Market prices have exceeded OPEC's current price band of $22-28/bbl since Dec. 2, 2003. The group has an agreed policy to adjust production by increments of 500,000 b/d for each dollar that prices fall outside that that band for 20 consecutive trading days.

Ramirez did not say what the new price band should be. However, it was recently suggested by one Venezuelan official that the band should be readjusted to $28-35/bbl.

Contact Sam Fletcher at [email protected]