Market watch: Gasoline strength, Iraq concerns drive Thursday's bullish market

Strong gains made by gasoline and other refined petroleum products drove crude oil futures prices even higher Thursday, coming on the heels of a $2/bbl gain in the past week. Another factor was mounting concern over possible US action targeting Iraq.

March 8, 2002

2 min read

By the OGJ Online Staff
HOUSTON, Mar. 8 -- Strong gains made by gasoline and other refined petroleum products drove crude oil futures prices even higher Thursday, coming on the heels of a $2/bbl gain in the past week.

On the New York Mercantile Exchange, the April contract for benchmark US light, sweet crude gained 56¢ to $23.71/bbl. The May contract also advanced 55¢ to $24.00/bbl. In after-hours trading, however, the April contract fell from the NYMEX close, standing at $23.65/bbl.

Refined products closed higher as well, with heating oil for April delivery closing up 1.96¢ to 61.89¢/gal. Gasoline for the same month, meanwhile, closed up 2.35¢/gal to 76.38¢/gal. The April natural gas contract rose 19¢ to stand at $2.76/Mcf.

Commodities trading was driven by overall strong demand for gasoline in the US. In addition, press reports of unscheduled closings of some US refineries aided the price boost.

Other reasons are behind the recent rally in crude oil prices—which are now above the 15-year average levels by about 13%, according to Banc of America Securities LLC analyst Tyler Dann. "Worries over US action against Iraq have prompted massive short covering in the commodity," he said. "Also, bullish sentiment on the economy has helped sentiment on the oil demand outlook for 2002. The bullish Iraq story has more than outweighed concerns over a market share war between Russia and OPEC."

In the short term, Dann said, oil prices may correct themselves. "We forecast that the WTI oil price could drop from [Thursday's] close of almost $24/bbl to the $20/bbl range within the next month, a level more consistent with our view of sustainable oil prices.

In London, the April contract for North Sea Brent oil gained closed above $23/bbl. The contract on the International Petroleum Exchange was up by 58¢ to reach $23.30/bbl. The April natural gas position dipped slightly by 1¢ to the equivalent of $2.21/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was up 43¢ to $21.71/bbl Thursday.