MARKET WATCHOil prices continue to climb

Oil prices continued to climb Thursday as OAO Yukos again shook up markets with claims that Russian court actions had "paralyzed" its operations by freezing more assets.

Sept. 3, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Sept.3 -- Oil prices continued to climb Thursday as OAO Yukos again shook up markets with claims that Russian court actions had "paralyzed" its operations by freezing more assets.

Yukos, which owes $3.4 billion in back taxes to the Russian government, said Thursday that a Moscow court froze $2.6 billion in the bank accounts of the company's subsidiaries in addition to a previous block on half of the cash flow generated directly by Yukos. As a result, the company said, those subsidiaries "no longer have the ability to conduct any transactions." However, other officials reported Thursday that Yukos's oil production continued as normal.

Many analysts have expressed doubts that Yukos will be forced to shut in its production as a result of its court battles with the Russian government. Russian officials said Thursday that the country's crude production hit a post-Soviet high of an average 9.37 million b/d during August, with Yukos maintaining its position as the largest producer. Yukos's production increased by 12,000 b/d to 1.74 million b/d during August, although its exports via pipelines outside the commonwealth fell by 15,000 b/d.

Markets in New York and London also were rattled by another explosion and fire in a pipeline in northern Iraq, analysts reported.

Moreover, at midnight Thursday the Norwegian Shipowners Association imposed a lockout of all members of the Federation of Oil Workers Trade Unions (OFS) at 12 oil and natural gas facilities off Norway. Included are three mobile rigs, eight rigs on fixed platforms, and the Petrojarl I floating production, storage, and offloading unit in Statoil AS's Glitne field in the North Sea. Production from that field is in the process of being shut down and is to be completely curtailed early next week.

Some 200 OFS members at several rigs have been on strike in a wage dispute since early July.

Energy prices
Yukos's latest report of its legal woes caused the October contract for benchmark US light, sweet crudes to jump to $45.37/bbl during trade Thursday on the New York Mercantile Exchange before closing at $44.06/bbl, up just 6¢ for the day. The November position advanced by 5¢ to $44.01. On the US spot market, West Texas Intermediate at Cushing, Okla., also gained 6¢, to $44.07/bbl.

Gasoline for October delivery increased by 0.42¢ to $1.1937/gal Thursday on NYMEX. Heating oil for the same month was up by 0.14¢ to $1.1839/gal. However, the October natural gas contract plunged to a new near-month low for the year, down 19.8¢ to $4.77/Mcf, after dropping below the $5/Mcf mark in the previous session for the first time this year (OGJ Online, Sept. 2, 2004).

In London, the October contract for North Sea Brent crude gained 10¢ to $41.57/bbl Thursday on the International Petroleum Exchange. Gas oil for September delivery jumped by $14.25 to $384.50/tonne. The October natural gas contract lost 4.4¢ to the equivalent of $5.45/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 87¢ to $39.68/bbl Thursday.

Contact Sam Fletcher at [email protected]