Market watch: Energy price declines slow

The recent freefall of energy futures prices slowed Thursday with aggressive buying of home heating oil that convinced some analysts the market may be about to bottom out. The October contract for home heating oil increased 0.24¢ to 72.14¢/gal on the New York Mercantile Exchange.

Sept. 21, 2001

3 min read

By the OGJ Online Staff

HOUSTON, Sept. 21 -- The recent freefall of energy futures prices slowed Thursday with aggressive buying of home heating oil that convinced some analysts the market may be about to bottom out.

The October contract for home heating oil increased 0.24¢ to 72.14¢/gal on the New York Mercantile Exchange.

Benchmark US light, sweet crude for the same month lost 13¢ to $26.59/bbl, however, while the November contract dropped 38¢ to $26.73/bbl. In after-hours electronic trading, the October contract continued its slide down to $26.65/bbl.

In a special report issued Thursday, energy group analysts with Raymond James & Associates Inc. in Houston and other offices said the market may be overestimating the falloff in world demand for oil and could soon face supply shortages instead (OGJ Online, Sept. 20, 2001).

Those analysts claim the new US war on terrorism poses a 20%-30% risk of a major disruption in world oil supplies over the next few months, escalating to more than an 80% probability within 2 years. They see "a growing chance that Middle East oil-producing nations could become involved and potentially become targets of terrorist retribution themselves."

Oil supplies also could be disrupted if insurance companies refuse to shoulder the increased risk of providing coverage for offshore drilling and transportation facilities in the Middle East, the Raymond James analysts said.

Shipping industry officials report London underwriters already are quoting war-risk surcharges for tankers in Middle East waters that could add 50¢/bbl to the cost of Iranian or Iraqi crude by next week and push up export costs for other Persian Gulf shippers by 25¢/bbl.

Iranian officials are calling on members of the Organization of Petroleum Exporting Countries to resist such surcharges. They claim a fake crisis is being created at a time when the Middle East remains relatively calm.

Meanwhile, unleaded gasoline for October delivery lost 0.99¢ to 74.26¢/gal Thursday on the NYMEX. The natural gas contract for October increased by 3.5¢ to $2.14/Mcf.

The NYMEX has worked a shortened daily trading timetable this week because of disruptions caused by the Sept. 11 terrorist attack on the nearby World Trade Center. However, exchange officials said they plan to resume normal hours of trading next week.

NYMEX meanwhile has indefinitely postponed its proposed launch of calendar spread options contracts, based on North Sea Brent and US benchmark crudes, that originally was scheduled to start Friday.

In London, Brent crude futures continued their downward drift on the International Petroleum Exchange with reports of more layoffs and possible bankruptcies among airlines.

The November Brent contract lost 40¢ to $25.92/bbl Thursday. The October natural gas contract also declined 2.1¢ to $3.12/Mcf on the IPE.

The average price for OPEC's basket of seven crudes recouped 22¢ to $24.51/bbl.