Market watch, Dec. 5

Energy futures prices closed mixed in trading on the New York Mercantile Exchange Monday as weather-driven demand in the US pushed NYMEX natural gas for January delivery 76� higher to finish at $7.43/Mcf. Gas prices rallied on the news that the Midwest and Northeast face below-normal temperatures during the next few weeks.


Energy futures prices closed mixed in trading on the New York Mercantile Exchange (NYMEX) Monday as weather-driven demand in the US pushed NYMEX natural gas for January 76� higher to finish at $7.43/Mcf.

Natural gas prices rallied on the news that below-normal temperatures are expected in the Midwest and Northeast during the next few weeks. Given tight supplies of gas this winter, traders started bidding up prices. Home heating oil, which in some cases is an alternative for gas, followed suit.

George Speicher, a broker with FIMAT Futures USA in Houston, reported seeing quotes close to $8/Mcf in early Tuesday trading and said he expected prices to continue rising, especially since more cold weather was anticipated in the Midwest.

"We'll need to see a good bout of above-normal temperatures in the Midwest and Northeast before prices weaken." He noted that most traders wanted to stay long in gas futures, but had been selling their positions late in the day and buying back into them during after-hours trading to avoid paying margin calls. "Nobody wants to short this market."

NYMEX sweet, light crude, the American benchmark, fell 80� to settle at $31.22/bbl for January delivery, while the February contract stood at $30.47, down 70�. Refined petroleum products closed mixed, with January home heating oil rising by 3.76� to finish at $1.0084/gal, while unleaded gasoline for the same month declined by 2.23� to 80.2�.

Crude and gasoline prices fell because Iraq and the United Nations were expected to resolve a dispute over Iraqi oil prices. Saeed Hasan, Iraq's envoy to the UN, indicated that a compromise was near. Iraq stopped exporting briefly last week.

However, in after-hours electronic access trading in New York, NYMEX sweet, light crude brought $31.31/bbl for the January position and $30.72 for the February contract, both up from the NYMEX close.

Meanwhile, in London Monday, North Sea Brent crude oil futures prices dropped in largely technically related selling on the International Petroleum Exchange. Having slipped below support at $31/bbl, futures tested support at $30 and broke it on aggressive selling. Some players cited the likelihood of Iraq swiftly resuming oil exports after halting deliveries Friday as the reason for the slide in values.

But others dismissed the Iraqi disruption, saying it had had little effect on boosting prices in the first place. Brokers said the US market appeared much more bullish with the forecasts of more severe weather headed for the key consuming areas, but the mood was markedly more bearish on the IPE. On the IPE, the January natural gas contract settled at the equivalent of $4.59/Mcf, down 6�.

A US oil stocks report due Tuesday night was expected to show substantial increases in crude and products, as was the case last week.

On Monday, IPE January Brent futures settled at $29.34/bbl, down by 83� from the previous close. The day's high was $30.81 and the low $29.20.

On the Singapore exchange, North Sea Brent crude fell 83� to $29.34/bbl for the January contract. The February position fell 90� to $28.85.

The price of the OPEC basket of seven crudes was $28.28/bbl Monday, compared with $29.30 the previous Friday, according to OPEC secretariat calculations.

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