MARKET WATCHPrices fall with end of export problems in Norway, Iraq

Energy futures prices fell Friday after the Norwegian government imposed compulsory arbitration to end a weeklong strike by two unions over pensions and job security that threatened to paralyze crude exports from the world's third largest exporter.

June 28, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, June 28 -- Energy futures prices fell Friday after the Norwegian government imposed compulsory arbitration to end a weeklong strike by two unions over pensions and job security that threatened to paralyze crude exports from the world's third largest exporter.

That anticipated move came in response to a threat by the Norwegian Oil Industry Association to lockout workers from all offshore facilities, which would have triggered an almost complete shutdown of production from the Norwegian continental shelf. That area normally produces some 3.3 million b/d of oil and 7.3 bcfd of natural gas (OGJ Online, June 25, 2004).

Prospects that Iraq would soon resume crude exports at prewar levels also weakened Friday's market prices, said analysts. Early Saturday, workers completed repairs to the larger of two sabotaged pipelines in southern Iraq and began pumping crude through that line to two export terminals on the Persian Gulf. The smaller southern pipeline, which was less damaged, was repaired and returned to service earlier last week.

A third pipeline linking the Kirkuk oil field in northern Iraq with the Turkish export terminal in Ceyhan also was repaired and returned to service last week after being knocked out by sabotage in May.

Meanwhile, US officials handed over sovereignty to an interim Iraqi government in a surprise ceremony Monday, ending a 14-month occupation 2 days earlier than originally planned in an apparent move to avoid possible terrorist attacks. Senior US official Paul Bremer handed over a letter of authority to Iraqi officials and left that country a few hours later, a coalition source reported.

Energy prices
Energy futures prices continued their recent seesaw pattern Friday, with the August contract for benchmark US light, sweet crudes losing 38¢ to $37.55/bbl on the New York Mercantile Exchange. The September contract was down by 42¢ to $37.60/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., dropped by 60¢ to $37.15/bbl.

Gasoline for July delivery fell by 1.62¢ to $1.2057/gal Friday. Heating oil for the same month was down1.2¢ to $1.0107/gal. The July natural gas contract decreased by 13.2¢ to $6.35/Mcf, pulled down by the falling oil market. "Another factor keeping [natural gas] prices under pressure was expectations of continued mild temperatures through this week across much of the nation," said analysts Monday at Enerfax Daily.

In London, the August contract for North Sea Brent crude lost 33¢ to $34.97/bbl Friday on the International Petroleum Exchange. Cold, wet weather across much of Europe stimulated concerns that an early autumn might spur demand for heating oil. Still, gas oil for July delivery lost $2.25 to $317/tonne. The July natural gas contract also declined, down by 1.9¢ to the equivalent of $3.83/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dipped by 15¢ to $33.95/bbl Friday. So far this year, the OPEC basket price has averaged $32.56/bbl.

Contact Sam Fletcher at [email protected].