Market watch: London oil futures fall in anticipation of inventory increase
By the OGJ Online Staff
HOUSTON, Feb. 19 -- Oil futures prices fell Monday in London's International Petroleum Exchange in anticipation of another bearish report on US petroleum inventories late Tuesday by the American Petroleum Institute.
The April contract for North Sea Brent oil lost 54¢ to $20.33/bbl on the IPE, while the March natural gas contract dipped 4.2¢ to the equivalent of $2.53/Mcf.
The New York Mercantile Exchange was closed Monday for the President's Day holiday. However, in after-hours electronic trading on the NYMEX early Tuesday, both the March and April contracts for benchmark US sweet, light crudes were down from Friday's close to $21.05/bbl and $21.37/bbl, respectively.
Traders perceive oil market fundamentals to be worsening because of decreased demand during this unusually warm winter. US gasoline stocks have increased steadily for several successive weeks, closely watched by the market. Another substantial rise in US inventories would likely trigger selling and perhaps test IPE support at $20/bbl for Brent crude, some analysts said.
However, Robert Morris at Salomon Smith Barney Inc. noted that oil prices got a slight boost last week from speculation that US crude imports will soon be curbed as a result of reduced production quotas among members of the Organization of Petroleum Exporting Countries.
Moreover, he said, economic data last week indicated that the US economy may be emerging from the recession.
"Another event to keep an eye on along the oil front is the meeting this Wednesday between Russia's major oil producers and the country's prime minister to review Russia's oil export strategy and relationship with OPEC," said Morris.
Several Russian officials recently warned that Russia cannot be counted on to restrain output beyond the first quarter. "It would be wrong to expect that Russian officials will follow (production) rules imposed by outsiders. Russia is independent and will do what is in its own best interest," said Andrei Illarionov, economic advisor to Russian President Vladimir Putin, in a keynote speech last week at a meeting of energy industry executives in Houston, sponsored by Cambridge Energy Research Associates (OGJ Online, Feb. 12, 2002).
Obaid Bin Saif al-Nasseri, petroleum minister for the United Arab Emirates, called Monday for Russia to maintain cooperation with OPEC members in reducing world supplies of oil. Without such cooperation, he said, OPEC could hardly maintain reasonable prices for oil.
"OPEC will continue to abide by the agreement until the end of the year, unless there are political and technical developments that necessitate the conclusion of a new agreement," said Al-Nasseri.
The average price for OPEC's basket of seven crudes lost 41¢ to $19.06/bbl Monday.