Market watch, Oct. 23

Mid-East tensions amid the last-minute rush to build US winter inventories of heating oil and natural gas pushed up international energy futures prices at the end of last week. However, analysts are encouraged that a summit meeting of Arab leaders over the weekend�the first since 1996�was dominated by moderates who advocated perseverance in peace talks with Israel.


Mid-East tensions amid the last-minute rush to build US winter inventories of heating oil and natural gas pushed up international energy futures prices at the end of last week.

However, analysts are encouraged that a summit meeting of Arab leaders over the weekend�the first since 1996�was dominated by moderates who advocated perseverance in peace talks with Israel.

"Without a further escalation in violence in the Middle East as efforts persist in reaching a peaceful resolution, crude oil prices may moderate near term," Robert Morris, energy analyst at Salomon Smith Barney Inc., reported Monday morning.

Moreover, Morris said, this Friday will mark the 20th day that oil prices have exceeded the $28/bbl price-band mechanism unofficially set by the Organization of Petroleum Exporting Countries.

"Both Saudi Arabia's oil minister and OPEC's president and Venezuela's oil minister have suggested that OPEC would increase production if oil prices remained high," he said. "However, we believe that OPEC members are likely to postpone any decision on raising output until its scheduled Nov. 12 summit in Vienna."

The November contract for the benchmark US sweet, light crude gained 84� to $33.75/bbl on the New York Mercantile Exchange on Friday, while the December contract jumped $1.05 to $32.95. But both contracts slipped in after-hours electronic trading to $33.37/bbl and $32.60/bbl respectively.

Home heating oil for November delivery gained 1.93� to 97.11�/gal on the NYMEX, while the November contract for unleaded gasoline rose 2.19� to 95.84�/gal. But the November position for natural gas dipped by 1.4� to $4.98/Mcf.

"With only 3 weeks left to be reported in the traditional storage refill season, (natural gas) storage levels remain on course to enter this winter at around 2,700 bcf or below. Subsequently, natural gas prices are expected to maintain a relatively strong course through next year under almost any winter-weather scenario," said Morris. Gas inventories totaled 3 tcf at the start of the 1999-2000 winter season.

In London, the December contract for North Sea Brent crude gained 88� Friday to $31.62/bbl on the International Petroleum Exchange. Brokers said Brent crude is expected to remain above the $30/bbl level pending further news from OPEC.

The November contract for natural gas lost 7� to the equivalent of $3.70/Mcf on the IPE.

On the Singapore exchange, the December contract for North Sea Brent crude oil was up by $1.31 to $32.05/bbl. The January contract rose $1.22 to $31.62/bbl.

The average price for OPEC's basket of seven crudes inched up 5� to $30.57/bbl Friday. That basket price averaged $30.84/bbl last week, up 47� from the previous week, but down from an average price of $31.48/bbl in September.

So far this year, the OPEC basket has averaged $27.42/bbl, up sharply from an average $17.47/bbl for all of 1999 and $12.28/bbl in 1998.

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