Market watch, Jan. 16
Oil futures prices pushed past the psychological barrier of $26/bbl on the London market Monday after Saudi Arabia�s oil minister suggested that the Organization of Petroleum Exporting Countries will cut production by at least 1.5 million b/d at its Wednesday meeting in Vienna.
Oil futures prices pushed past the psychological barrier of $26/bbl on the London market Monday after Saudi Arabia�s oil minister Ali I. Naimi suggested that the Organization of Petroleum Exporting Countries will cut production by at least 1.5 million b/d at its Wednesday meeting in Vienna.
Market analysts are speculating that the cut will be even bigger�perhaps 2 million b/d�to accommodate Iraq�s higher exports that aren�t counted in the OPEC production ceiling.
Analysts are convinced that, after increasing production four times last year, OPEC members want to be sure their next action will send a clear signal to markets to hike prices.
OPEC producers became concerned late last year when oil prices dropped sharply with a surplus of oil on the markets that allowed western countries to replenish inventories.
Apparently, US Energy Sec. Bill Richardson�s was unsuccessful, in eleventh-hour meetings with top OPEC officials last week, in persuading them to restrain prices while western consumers build inventories.
On Monday, the February contract for North Sea Brent crude increased 43� to $26.18/bbl on the International Petroleum Exchange in London. The February natural gas contract also gained 14� to the equivalent of $4.34/Mcf.
The New York Mercantile Exchange was closed Monday for the Martin Luther King holiday. However, in after-hours electronic trading, the benchmark blend of US light, sweet crudes was fetching $30.32/bbl for the February position and $29.01/bbl for March. On Friday, those two contracts closed at $30.05/bbl and $28.76/bbl, respectively.
The American Petroleum Institute�s weekly report of US crude and petroleum products inventories, usually released after the NYMEX closes each Tuesday, has been postponed until Wednesday afternoon as a result of Monday�s holiday, officials said.
Meanwhile, Robert Morris, senior energy analyst at Salomon Smith Barney Inc., said the American Gas Association is expected to report 120-135 bcf of gas was withdrawn from US underground storage last week. That would widen the gas storage deficit to 770 bcf�or nearly 35% below last year�s levels�just 10 weeks into the heating season.
Temperatures across the US last week were 18% below year-ago levels. However, temperatures have moderated because of a �more zonal shift� in the jet stream, with no sign of sizeable Arctic air masses entering the continental US in the coming week, Morris reported.