Energy prices jump with Russian support of OPEC

International energy prices shot up Thursday with growing evidence of determination among members of the Organization of Petroleum Exporting Countries to curb production. Markets got another boost early Friday when Russian Prime Minister Mikhail Kasyanov indicated that non-OPEC country will cut its oil exports, too.

Nov. 9, 2001

3 min read

By the OGJ Online Staff

HOUSTON, Nov. 9 -- International energy prices shot up Thursday with growing evidence of determination among members of the Organization of Petroleum Exporting Countries to curb production at their ministerial meeting next Wednesday.

Markets got another boost early Friday when Russian Prime Minister Mikhail Kasyanov said Russian oil companies also are prepared to cut crude exports.

By mid-morning London time Friday, North Sea Brent crude had rebounded by $2/bbl above the 2-year low it hit during intra-day trade Wednesday on the International Petroleum Exchange, said economist Paul Horsnell, who joined JP Morgan Chase & Co. as head of energy research in April from the Oxford Institute for Energy Studies.

"The Russian statement is clearly bullish, as the market expectation of any support for OPEC from Russia has increased from its previous level of zero. Whatever the raised eyebrows given Russia's track record in supporting OPEC to date, some support is an advance on no support at all," he said.

However, Horsnell said, "The statement will need some clarification to judge its full impact, e.g. are the Russians really talking about a cut in absolute output, or a cut in the rate of increase of output. If it is the latter, then that would be a major help for OPEC. If it really is the former, then the market faces a supply crunch."

Overall, Horsnell said, "Developments on the supply side of the oil market are becoming more than sufficient to overwhelm the depressive forces on the demand side."

Thursday the December contract for benchmark US light, sweet crudes jumped by $1.08 to $21.17/bbl on the New York Mercantile Exchange, while the January position gained $1.09 to $21.37/bbl. In after-hours electronic trading, the December US oil contract continued its advance to $21.30/bbl, while the January contract dipped to $21.36/bbl.

Home heating oil for December delivery shot up 3.54¢ to 60.72¢/gal during the regular trading session on the NYMEX. Unleaded gasoline for the same month jumped 3.01¢ to 57.64¢ in a market where price moves are usually measured in percentages of a penny.

Even the December contract for natural gas checked its recent decline, gaining 9¢ to $2.96/Mcf.

In London, North Sea Brent crude for December delivery increased 95¢ to $20.28/bbl Thursday on the IPE, and the January contract was up $1.07 to $20.43/bbl.

The December natural gas contract inched up 2¢ to the equivalent of $3.37/Mcf on the IPE.

The average price for OPEC's benchmark basket of seven crudes increased 87¢ to $18.51/bbl Thursday, the first major gain since Sept. 24 when it dropped below the group's targeted price range of $22-$28/bbl.