Market watch: Energy futures higher on non-OPEC discussions

By the OGJ Online Staff

HOUSTON, Nov. 21 -- Energy futures prices advanced in trading on the New York Mercantile Exchange Tuesday.

The January contract for light, sweet crude rose 72¢ to end at $19.15/bbl, while the February contract stood at $19.37, up by 71¢. In after-hours electronic access trading in New York, the January contract was fetching $19.45, and the February contract was fetching $19.65.

Refined petroleum products also closed higher, with home heating oil for December delivery advancing by 1.38¢ to rest at 53.76¢/gal, while unleaded gasoline for the same month jumped by 2.02¢ to finish at 52.81¢/gal.

NYMEX natural gas for January delivery added 6.1¢ to end at $2.85/Mcf.

The market reacted to signs of producers leaning towards cooperating with the Organization of Petroleum Exporting Countries to cut production.

Norwegian and Mexican oil ministers held a meeting to consider the matter, and Russia indicated that it would consider higher production cuts than earlier stated.

After the end of the trading session, the American Petroleum Institute released its weekly inventory report.

It estimated that during the previous week, the nation's stocks of crude increased by 357,000 bbl, while those of gasoline climbed by 344,000 bbl.

Home heating oil stocks, however, declined by 699,000 bbl during the same period.

Meanwhile, in London Tuesday, North Sea Brent crude oil futures also rallied on the International Petroleum Exchange, following statements by Norwegian and Mexican oil officials.

Brokers also expressed hope that a compromise on non-OPEC production cuts could be reached with Russia.

OPEC has pledged to cut its output by 1.5 million b/d starting Jan. 1, as long as non-OPEC producers reduce output by 500,000 b/d at the same time.

The brokers noted that Norway and Mexico were both talking to Russia about agreeing to a more substantial output cut, in order to avert a catastrophic fall in crude prices.

The officials were optimistic that Russia would agree to cut more than its pledged 30,000 b/d.

Although futures rose on this news, traders still remained skeptical that Russia would agree a significant enough production cut.

They also doubted whether the Russian government could strictly enforce a cut on the six privately owned oil companies that produce Russia's oil.

If no agreement was forthcoming, prices were likely to slide back to around $17/bbl or below, the brokers noted.

On Tuesday, IPE January Brent futures settled at $18.75/bbl, up by 74¢ from the previous close. The day's high was $19.12 and the low $17.79.

Also, IPE gas for December delivery fell 1¢ to close at the equivalent of $3.51/Mcf.

OPEC's basket of seven crudes stood at $17.06/bbl Tuesday, compared with $15.85 the previous day.