MARKET WATCHCrude futures prices increase with attacks on Iraqi oil facilities
Sam Fletcher
Senior Writer
HOUSTON, June 17 -- Crude futures prices rose slightly in New York and London markets Wednesday with continued terrorist attacks on oil targets in Iraq.
Terrorists again sabotaged Iraq's primary southern pipeline Wednesday. Previous attacks on the two crude pipelines supplying export terminals on the Persian Gulf forced Iraq's state oil marketing agency to close the Basrah terminal Tuesday (OGJ Online, June 16, 2004). Iraqi officials said it could be weeks before oil exports are back to previous levels of 1.6-1.8 million b/d.
The latest escalation of violence in Iraq "is far more important than the initial market response might imply," said Paul Horsnell, head of energy research, Barclays Capital Inc., London. "Oil exports are being very deliberately, and so far very successfully, targeted."
"Attacks on pipelines feeding Iraq's Basrah and Khor al-Amaya terminals, with export capacity of 1.6 million and 400,000 b/d, respectively, have halted all exports from [southern Iraq] for now," said Robert S. Morris, an analyst with Banc of America Securities LLC, New York, in a Tuesday report.
"In addition, there have been no exports from Kirkuk in the north since a pipeline attack in late May," Morris said. "Over all, total Iraq exports last month, on average, declined 200,000 b/d, or 11%, to 1.6 million b/d compared with April following similar pipeline attacks."
Other analysts said the latest attack might have triggered a bigger jump in energy prices if not for assurances that other members of the Organization of Petroleum Exporting Countries are willing and able to fill any supply gaps.
However, loss of Iraqi oil exports, "depending on how long the shut-ins last and if there are additional attacks," Morris said, "could offset a significant portion of the projected uptick in OPEC (excluding Iraq) production this month. We estimate OPEC production (excluding Iraq) in June will rise by at least 1 million b/d to 27.5 million b/d."
Energy prices
The July contract for benchmark US sweet, light crudes regained 13¢ to $37.32/bbl Wednesday on the New York Mercantile Exchange, after losing 40¢/bbl in profit-taking sales Tuesday. The August contract rebounded by 23¢ to $37.65/bbl Wednesday. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by 15¢ to $37.33/bbl.
Heating oil increased by 0.85¢ to 98.6¢/gal Wednesday on NYMEX. However, gasoline for the same month dipped by 0.41¢ to $1.1462/gal. The July natural gas contract jumped by 18.5¢ to $6.49/Mcf on NYMEX, "fueled by stronger cash prices [on the US natural gas spot market] amid hot, humid weather in the Northeast and Midwest that increased demand," said analysts Thursday at Enerfax Daily.
In London, the August contract for North Sea Brent crude increased by 17¢ to $35.20/bbl Wednesday on the International Petroleum Exchange. However, brokers said the perception in that market is that the balance is beginning to tip into oversupply.
Gas oil for July delivery inched up by 50¢ to $308.75/tonne. Although unchanged in regular trading Wednesday on IPE, the July natural gas contact increased to the equivalent of $3.95/Mcf solely on the strengthening of the British pound vs. the US dollar.
The average price of OPEC's basket of seven benchmark crudes increased by 21¢ to $33.93/bbl Wednesday.
Contact Sam Fletcher at [email protected]