Market watch: Iraq's proposed embargo pushes up oil futures prices
By OGJ editors
HOUSTON, Apr. 9 -- Energy futures prices rebounded Monday as Iraq vowed to halt its oil exports for a month in protest over Israel's occupation of disputed Palestinian territories.
Although Iran and Libya indicated sympathy for Iraq's call for an embargo of oil exports to the US, several members of the Organization of Petroleum Exporting Countries and nonmember producers said they have no plans to change their current production and export levels.
"OPEC output appears to have increased during March, while last week's US crude oil and product inventory figures were more on the 'bearish' side for oil prices," said Robert Morris, energy analyst for Salomon Smith Barney Inc., in his weekly exploration and production report Monday.
"Overall, we believe that oil prices reflect around a $6/bbl 'war premium' that is likely to largely persist until near the end of May when push comes to shove on the renewal of the current phase of the oil-for-food program with Iraq, although prices could subside a bit in the interim if the violence between Israel and the Palestinians diminishes," he said.
"A key event to keep a close eye on this week will be US Sec. of State Colin Powell's trip to the Middle East in an effort to halt the violence between Israel and the Palestinians," Morris said. "Next week, a second round of negotiations is scheduled between the UN and Iraq on the return of weapons inspectors."
The May contract for benchmark US light, sweet crudes gained 33¢ to $26.54/bbl Monday on the New York Mercantile Exchange. But in after-hours electronic trading, it retreated to $26.20/bbl.
Unleaded gasoline for May delivery jumped by 2.49¢ to 84.19¢/gal during the regular NYMEX trading session. Heating oil for the same month rose 1.08¢ to 69.3¢/gal. The May natural gas contract advanced 5.2¢ to $3.33/Mcf.
In London, futures prices for North Sea Brent oil rebounded above $27/bbl Monday as the prospect of a possibly tight oil market in coming months triggered buying on the International Petroleum Exchange. Although loss of Iraq's restricted oil exports would not significantly alter the world's supply/demand balance, brokers said, prices could spiral up quickly if any other Islamic oil-producing nation joined Iraq's embargo.
The May Brent contract jumped by $1.03 to $27.02/bbl Monday. The May natural gas contract also gained 8.3¢ to the equivalent of $1.88/Mcf on the IPE.
The average price for OPEC's basket of seven benchmark crudes gained 17¢ to $25.13/bbl Monday.