Market watch: Oil prices rally with OPEC reduction
Oil futures prices rose slightly in international markets Friday in anticipation of a decision by the Organization of Petroleum Exporting Countries over the weekend to cut its production by 1 million b/d, effective Apr. 1.
By the OGJ Online Staff
HOUSTON, Mar. 19�Oil futures prices rose slightly in international markets Friday in anticipation of a decision by the Organization of Petroleum Exporting Countries over the weekend to cut its production by 1 million b/d, effective Apr. 1.
That decision came after careful study of crude markets and the effect of a probable US economic slowdown on international demand for oil, said Chakib Khelil, Algeria�s energy minister and president of the OPEC conference. Khelil said he also expects an additional reduction of at least 200,000 b/d from Mexico, Russia, Oman, Angola, and Kazakhstan, who were observers at the OPEC meeting in Vienna.
Some analysts put the potential total reduction at 1.5 million b/d as a result of that agreement. However, compliance with OPEC�s new production quota total of 24.2 million b/d remains an issue. Petroleum Finance Co. of Washington calculates that OPEC members are still 500,000 b/d short of their last agreed production cut of 1.5 million b/d in January.
OPEC members said they would continue to assess market and economic conditions. If warranted, they could adjust production prior to the group�s next scheduled meeting June 5, Khelil said.
The April contract for benchmark US sweet, light crudes gained 19� to $26.74/bbl Friday on the New York Mercantile Exchange, while the May contract was up 10� to $26.92/bbl. Both continued to climb in after-hours electronic trading to $26.91/bbl and $27.11/bbl, respectively.
Refined products were mixed, however, with unleaded gasoline for April delivery gaining 0.64� to 87.43�/gal and home heating oil for the same month dipping 0.27� to 70.38�/gal. The April natural gas contract gained 10.8� to $5.04/Mcf.
In London, North Sea Brent crude futures were little changed Friday as the International Petroleum Exchange awaited OPEC�s decision. That market was expecting OPEC members to agree quickly on a cut of 500,000 b/d Friday and tended to discount the possibility of a bigger reduction, brokers said.
The May contract for Brent crude closed at $25.05/bbl Friday, up 4� for the day, after trading in the range of $25-$25.95/bbl. The April natural gas contract inched up 2� to the equivalent of $3.26/Mcf on the IPE.
The average price for OPEC�s basket of seven crudes gained 32� to $23.09/bbl Friday.
However, the average basket price for all of last week was $23.99/bbl, down from $24.58/bbl the previous week, OPEC officials reported Monday.