Market Watch: July 6

Energy futures prices plunged Wednesday as the New York Mercantile Exchange reopened after its 2-day holiday. The August contract for NYMEX light, sweet crude dropped $1.83 to $30.67/bbl in reaction to 2-day-old reports that Saudi Arabia is considering another production increase of 500,000 b/d in an effort to push world oil prices back to about $25/bbl.


Energy futures prices plunged Wednesday as the New York Mercantile Exchange reopened after its 2-day holiday.

The August contract for NYMEX light, sweet crude dropped $1.83 to $30.67/bbl in reaction to 2-day-old reports that Saudi Arabia is considering another production increase of 500,000 b/d in an effort to push world oil prices back to about $25/bbl. The September contract lost $1.53 to end the day at $29.60/bbl.

But in after-hours electronic trading, both contracts inched up again to $30.78/bbl and $29.75/bbl, respectively.

The initial knee-jerk reaction to the proposed production increase brought down other energy futures as well, with August unleaded gasoline falling 4.74� to 96.05�/gal. Meanwhile, home heating oil prices declined 3.64� to 79.64�/gal.

Even the August contract for natural gas lost 30� to close at $4.11/Mcf.

Despite confusion about the timing and other aspects of the proposed increase in Saudi production, most traders apparently believe it could be a major factor in futures market.

In London, the August contract for North Sea Brent closed slightly lower on the International Petroleum Exchange after recovering from much of the day's earlier losses. It settled at $29.38/bbl, down 20�, after trading as low as $28.55/bbl during the day.

IPE traders apparently are wary of Saudi Arabia's proposal, however. Brokers said Wednesday that Brent is unlikely to move much closer to $30/bbl without attracting some buying.

The August gas contract was off less than 1� to the equivalent of $2.69/Mcf on the IPE in London.

The average price for the Organization of Petroleum Exporting Countries basket of seven crudes retreated 67� to $28.99/bbl.

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