MARKET WATCHCrude futures prices decline on NYMEX

Futures prices for crude and petroleum products declined Monday on the New York Mercantile Exchange on traders' expectations that members of the Organization of Petroleum Exporting Countries will increase production by 4.2% this month.

June 15, 2004

2 min read

Sam Fletcher
Senior Writer

HOUSTON, June 15 -- Futures prices for crude and petroleum products declined Monday on the New York Mercantile Exchange on traders' expectations that members of the Organization of Petroleum Exporting Countries will increase production by 4.2% this month.

Purnomo Yusgiantoro, OPEC's conference president and energy minister for Indonesia, also called on non-OPEC producers to increase production to pull down high oil prices that could hurt the economies of developing nations.

But in a conference call Tuesday, Bernard J. Picchi, at Foresight Research Solutions LLC, New York, said there is "no surplus [production] capacity at all within the system" to push prices down to levels at or below the lower range of OPEC's target of $22-28/bbl.

Many exploration and production companies "say they can do well" with "strategic" crude market prices of $25-30/bbl over the long run, Picchi reported. However, he said, higher "tactical" price spikes must be factored in as a result of short-term fluctuations in demand and supplies.

During that conference, another Foresight Research analyst, Barry Borak, said the "breakeven" mark for non-OPEC producers has risen over the last 5-7 years to $28-30/bbl to cover operating expenses and the rising cost of capital. "So prices need to be north of that range," he said.

Energy prices
The July contract for benchmark US sweet, light crudes fell by 86¢ to $37.59/bbl Monday on NYMEX, while the August contract was down by 77¢ to $37.88/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., dropped by 87¢ to $37.58/bbl.

Gasoline for July delivery plunged by 3.56¢ to $1.1525/gal on NYMEX. Heating oil for the same month declined by 2.16¢ to 98.24¢/gal. However, the July natural gas contract gained 6.8¢ to $6.24/Mcf, "fueled by warmer, humid weather in the Northeast, some unexpected nuclear outages in the West, and longer term concerns about hydropower supplies," said analysts Tuesday at Enerfax Daily. All three units at the Palo Verde nuclear facility in Arizona were reported to be offline Monday because of a "major disturbance" in the power transmission system.

In London, the July contract for North Sea Brent crude inched up by 5¢ to $35.49/bbl on the International Petroleum Exchange. Gas oil for July delivery gained 25¢ to $313.25/tonne. However, the July natural gas contract dipped by 0.73¢ to the equivalent of $3.78/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes lost 30¢ to $34.29/bbl Monday.

Contact Sam Fletcher at [email protected]