Market watch: May 24, 2000

Oil futures prices began slowly climbing again Tuesday from the previous day's drop, as traders apparently overcame earlier fears that OPEC may again increase production. US Energy Sec. Bill Richardson said Tuesday he still may ask OPEC members to hike output to deflate high oil prices. But OPEC officials have said they will only consider the realities of supply and demand in making such decisions.

Oil futures prices began slowly climbing again Tuesday from the previous day's drop, as traders apparently overcame earlier fears that OPEC may again increase production. US Energy Sec. Bill Richardson said Tuesday he still may ask OPEC members to hike output to deflate high oil prices. But OPEC officials have said they will only consider the realities of supply and demand in making such decisions.

Industry analysts generally doubt if most OPEC members, aside from Saudi Arabia, have significant additional production capacity that can be brought on stream quickly or easily. Some say that any big, sustained increase would have to involve lifting trade sanctions on Iraqi crude�something that the US government adamantly opposes so long as Saddam Hussein is in power.

On the New York Mercantile Exchange (NYMEX), the July contract for a mix of light, sweet crudes gained 5� to $28.78/bbl, while the August contract lost 4� to close at $28.28/bbl. In after-hours electronic trading, however, the contracts increased to $29.03/bbl and $28.50/bbl, respectively.

On the International Petroleum Exchange (IPE) in London, the July contract for the North Sea Brent crude closed at $27.50/bbl, up 7� for the day after trading in ranges of $27.10-$27.60/bbl. London brokers said continued US pressure on OPEC members for additional production undermined IPE prices earlier this week, but an apparent price rally was reported in that market early Wednesday.

OPEC's average basket price for seven crudes increased 12� Tuesday to $27.38/bbl.

Meanwhile, North Sea Brent gained 5� to $27.65/bbl on the Singapore Exchange, although the August contract dipped 1� to $27.01/bbl.

"We feel the market still has strong sentiment to support a good level of prices," said one Singapore trader.

NYMEX trade in refined products was mixed Tuesday. The June contract for home heating oil lost 0.76� to 75.36�/gal, but the June contract for unleaded gasoline gained 0.26� to 93.37�/gal.

The NYMEX June contract for natural gas was up 6.7� to $3.81/Mcf. On the IPE, June gas also continued to climb, closing at the equivalent of $3.34/Mcf, up 28�.

Strong market pressures are likely to keep US gas prices buoyant this year. The US Energy Information Administration earlier estimated the refill rate for US gas storage facilities during the first 12 days of May averaged 7.25 Bcfd, down sharply from EIA's previous 5-year May average of roughly 11 Bcfd.

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