MARKET WATCHEnergy futures prices jump in response to supply threats
By OGJ editors
HOUSTON, June 18 -- Energy futures prices shot up Thursday with additional news on the extent of damage inflicted by terrorist attacks on Iraqi crude pipelines and indications that it may take weeks for that country to resume previous exports of 1.6-1.8 million b/d.
Although Iraqi officials indicated they might resume a small amount of crude exports as early as Friday, other sources said the bulk of that country's exports would take weeks to restore. Any additional sabotage could extend that timetable, of course.
Other members of the Organization of Petroleum Exporting Countries have promised to make up any slack in crude oil supplies, but the few with excess production capacity are primarily in the Middle East. Escalation of terrorist attacks in that region now has traders worrying about the security of those supplies.
Markets also were stimulated Thursday by reports of a fire at a jetty that halted loadings of gasoline barges at the 400,000 b/d Netherlands Refining Co. refinery in Rotterdam and by a threatened strike Friday by Norwegian oil workers.
Energy prices
The July contract for benchmark US light, sweet crudes jumped by $1.14 to $38.46/bbl Thursday on the New York Mercantile Exchange, while the August contract escalated by $1.16 to $38.81/bbl. On the US spot market, West Texas Intermediate was up by $1.15 to $38.48/bbl.
Heating oil for July delivery shot up by 4.48¢ to $1.0308/gal Thursday on NYMEX. Gasoline for the same month climbed by 4.09¢ to $1.1871/gal. The July natural gas contract advanced by 9.3¢ to $6.58/Mcf on NYMEX, pulled up by soaring crude prices. "Despite this week's gains [in the natural gas futures market], the downside seems more likely now with temperatures in key demand areas expected to cool off next week," said analysts Friday at Enerfax Daily.
In London, the August contract for North Sea Brent crude jumped by $1.01 to $36.21/bbl on the International Petroleum Exchange, partly in reaction to a smaller-that-expected increase in US crude inventories (OGJ Online, June 16, 2004). Gas oil for July delivery increased by $9.75 to $318.50/tonne Thursday, while the July natural gas contract inched up by 1.1¢ to the equivalent of $3.86/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes increased by 76¢ to $34.69/bbl Thursday.
Meanwhile, in its Monthly Oil Market Report for June, OPEC said, "Surprisingly strong oil demand growth, fueled by a rebounding global economy, has created a time lag in the entire supply chain." As a result, the report said, "Production has to be stepped up to meet higher-than-expected oil needs."
It observed that the market experienced a similar time lag "in the opposite direction" in 1998-99, caused by "a collapse in demand."
OPEC has called for some non-OPEC producers to ramp up their crude output to push down currently high oil prices. "We realize that some non-OPEC members can't increase production in the short term, but we believe they can over the longer term," OPEC President Purnomo Yusgiantoro said in an interview in Jakarta.