Market Watch, June 6, 2000
Oil futures fell on international markets Monday after Ali I. Naimi, Saudi Arabia's petroleum minister, said OPEC members will take necessary steps to deal with artificially high prices.
Oil futures fell on international markets Monday after Ali I. Naimi, Saudi Arabia's petroleum minister, said OPEC members will take necessary steps to deal with "artificially" high prices.
Saudi officials seemed to send mixed signals, however. Naimi also reported that international demand for oil might be greater than anticipated, citing stronger demand in Asian markets.
Later at the opening session of the Saudi consultative council in Riyadh, King Fahd Bin Abdulaziz Al-Saud said, "We are assured of the stability of oil prices, which have become today satisfactory and fair to producers and consumers."
The July contract for the benchmark blend of light, sweet crudes on the New York Mercantile Exchange (NYMEX) fell 65� to $29.70/bbl Monday, while the August contract dropped 52� to $28.92/bbl. Both contracts continued to slip in after-hours electronic trading, down to $29.65/bbl and $28.86/bbl respectively.
On the International Petroleum Exchange (IPE) in London, the July contract for North Sea Brent closed at $28.37/bbl, down 68� for the day. However, that contract was trading at $28.46/bbl Tuesday, up 9� from Monday's close, as brokers apparently took heart from King Fahd's remarks.
In overnight trade on the Singapore Exchange, the July Brent contract dropped 67� to $28.38/bbl, while the August contract was down 63� to $27.49/bbl.
The average price for the OPEC basket of seven crudes lost 66� to $27.77/bbl Monday.
On the NYMEX, the July contract for unleaded gasoline dropped 1.97� to 99.89�/gal, while home heating oil declined 0.94� to 74.67�.
However, the July contract for natural gas jumped 35.5� to $4.40/Mcf. On the IPE, the July gas contract rose 19� Monday to the equivalent of $3.06/Mcf.
Industry analysts said markets are awaiting clear indications and likely will move sharply on any new statements by OPEC ministers on the need to change production quotas prior to their meeting this month.
King Fahd said Monday, "We are sure of the cooperation of our partners in OPEC and their keenness on realizing the interest of all through their compliance with the resolutions of the organization and with whatever is agreed upon by member countries," the Saudi Press Agency reported.
He also referred to the participation of foreign oil companies in proposed oil and gas projects that are expected to pump billions of dollars into Saudi Arabia's economy. That country has already received investment offers from 18 oil companies, including several of the majors.
Meanwhile, US officials Monday reiterated their commitment to ban swap deals with Iran for export of oil from landlocked Caspian states. The US continues to oppose foreign oil investment in Iran, said John Wolf, special adviser to President Bill Clinton on Caspian affairs.