MARKET WATCHNYMEX crude price closes above $40/bbl for first time in nearly 14 years

Crude futures prices jumped past $40/bbl Tuesday on the New York Mercantile Exchange for the first time in nearly 14 years as traders shrugged off a call by Ali I. Naimi, Saudi Arabia's energy minister, for a production hike by the Organization of Petroleum Exporting Countries.

May 12, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, May 12 -- Crude futures prices jumped past $40/bbl Tuesday on the New York Mercantile Exchange for the first time in nearly 14 years as traders shrugged off a call by Ali I. Naimi, Saudi Arabia's energy minister, for a production hike by the Organization of Petroleum Exporting Countries.

Naimi's proposal for OPEC to hike its production quotas by 1.5 million b/d at its scheduled June 3 meeting in Beirut triggered a sharp decline in energy future prices Monday (OGJ Online, May 11, 2004) and was hailed Tuesday by US Energy Sec. Spencer Abraham as a "positive" move.

However, analysts and traders dismissed Naimi's proposal as essentially meaningless, since OPEC is already producing 2-3 million b/d more than its current quota of 23.5 million b/d, with most members now running at full capacity.

Chakib Khelil, Algeria's energy minister, noted that an increase in OPEC production probably would have no major effect on oil prices, which he said are likely to remain high for the rest of this year, with demand for oil increasing this summer and autumn in both the US and Europe.

Nonetheless, Purnomo Yusgiantoro, Indonesia's energy minister and conference president for OPEC, said the group might meet to discuss the international oil market prior to the scheduled June 3 session.

Energy prices
The June contract for benchmark US light, sweet crudes shot up by $1.13 to $40.06/bbl Tuesday on NYMEX, the highest level since the record $40.42/bbl set Oct. 11, 1990, shortly before the United Nations issued an ultimatum for Iraq to pull its invading troops out of Kuwait. The July contract advanced by $1.12 to $39.97/bbl Tuesday. On the US spot market, West Texas Intermediate at Cushing, Okla., escalated by $1.15 to $40.08/bbl.

Gasoline for June delivery rebounded by 2.6¢ to $1.3223/gal Tuesday on NYMEX, while heating oil for the same month jumped by 3.62¢ to $1.0158/gal. The June natural gas contract shot up by 20.2¢ to $6.39/Mcf, a new high for that contract "and the highest for a front-month [contract] since late January, with front months driven by a sharp rally in crude oil and rising temperatures this week," said analysts Wednesday at Enerfax Daily.

In London, the June contract for North Sea Brent crude rose by $1.39 to $37.36/bbl on the International Petroleum Exchange. Gas oil for May delivery gained $2.75 to $327.50/tonne. The June natural gas contract jumped by 13.8¢ to the equivalent of $3.84/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 35¢ to $35.57/bbl Tuesday.

Contact Sam Fletcher at [email protected]