Market Watch, July 21
World petroleum prices continued to erode Thursday after the head of the Organization of Petroleum Exporting Countries said there may yet be a way for that group to increase production next month. OPEC Sec. Gen. Rilwanu Lukman said it was possible for the cartel to raise production even if prices dip below the trigger level.
World petroleum prices continued to erode Thursday after the head of the Organization of Petroleum Exporting Countries said there may yet be a way for that group to increase production next month.
OPEC Sec. Gen. Rilwanu Lukman said it was possible for the cartel to raise production even if prices dip below the trigger level.
A previous proposal to increase OPEC production by 500,000 b/d was shelved earlier this week when price of the OPEC basket of crudes briefly slid below the trigger price of $28/bbl. However, Lukman emphasized OPEC's flexibility in coping with price situations to stabilize the market.
Apparently the OPEC leadership is still trying to maneuver in front of Saudi Arabian officials who some weeks ago proposed a unilateral production hike of 500,000 b/d. The Saudis want to push prices back to a $25/bbl level to prevent new non-OPEC energy sources from coming on stream that would compete with the kingdom's large oil resources. With some of the world's largest oil resources, Saudi Arabia is anxious to protect its future markets.
Sources report the Saudis are adamant about increasing production, starting with 250,000 b/d in August. However, other OPEC members don't want the Saudis to get all of the proposed market increase (OGJ Online, July 17, 2000).
Amid that confusion, the expiring August contract for benchmark US light, sweet crude dropped 49� to $30.93/bbl Thursday on the New York Mercantile Exchange, with the September contract down 58� to $29.77/bbl. In after-hours electronic trading, the September contract was fetching $29.55/bbl, while the October contract stood at $29.07/bbl, both down from Thursday's close.
The August contact for unleaded gasoline dropped 1.75� to 95.89�/gal on the NYMEX, while heating oil dipped 0.83� to 79.27�/gal. The August contract for natural gas lost 2.4� to $3.86/Mcf.
In London, the September contract for North Sea Brent crude was down 61� to $28.27/bbl in nervous selling on the International Petroleum Exchange. The August gas contract lost 4� to an equivalent $2.69/Mcf.