Market watch: IEA pessimism sinks energy futures price rally

Energy futures prices plummeted in international markets Friday, wiping out the previous day's gains as the International Energy Agency in Paris revised its estimates of global demand for oil through 2002 to the lowest level since 1984.

Oct. 15, 2001

3 min read

By the OGJ Online Staff

HOUSTON, Oct. 15 -- Energy futures prices plummeted in international markets Friday, wiping out the previous day's gains as the International Energy Agency in Paris revised its estimates of global demand for oil through 2002 to the lowest level since 1984.

The agency chopped its previous estimate by 400,000 b/d primarily because of a projected decline in the jet fuel market.

The agency also reported the 10 members of the Organization of Petroleum Exporting Countries, excluding Iraq, reduced their total production by only 450,000 b/d during September, instead of the 1 million b/d they agreed to cut from official quotas. IEA said those OPEC members produced nearly 24.5 million b/d in September instead of their self-imposed 23.2 million b/d limit.

Markets rebounded somewhat Thursday with expectations that OPEC would soon take action to stabilize its basket price which has floundered below its $22-$28/bbl targeted price range for 3 weeks.

But over the weekend Chakib Khelil, OPEC conference president, reiterated that cartel ministers have no present plans to call a special meeting. He did say consultations among OPEC and non-OPEC producers would continue to investigate means of stabilizing world oil prices around $25/bbl.

OPEC members' heads of state may meet to discuss the problem, however, said Venezuelan President Hugo Chavez who visited over the weekend with Algerian President Abdelaziz Bouteflika and Libyan President Co. Moammer El Qaddafi.

The November contract for benchmark US light, sweet crude fell 84¢ to $22.50/bbl Friday on the New York Mercantile Exchange, while the December contract dropped 87¢ to $22.82/bbl. Both contracts continued to decline during after-hours electronic trading to $22.48/bbl and $22.80/bbl respectively.

Home heating oil for November delivery plummeted 2.92¢ to 63.84¢/gal on the NYMEX. Unleaded gasoline for the same month tumbled 2.63¢ to 60.1¢/gal, while the November natural gas contract lost 10.1¢ to $2.43/Mcf.

In London, North Sea Brent oil futures also fell as analysts predicted that the US gasoline market would suffer as nervous motorists also would reduce travel during the conflict between the Allied military and terrorists in Afghanistan.

The November Brent contract dropped 73¢ to $21.73/bbl Friday. The November natural gas contract also lost 2.2¢ to the equivalent of $3.21/Mcf on the IPE.

The average price for OPEC's basket of seven crudes dropped 61¢ to $19.82/bbl Friday.

For the week as a whole, however, the OPEC price averaged $19.95/bbl, down from an average $20.26/bbl the previous week.

So far this year, the OPEC price has averaged $24.48/bbl, compared to averages of $27.60/bbl for all of 2000 and $17.47/bbl in 1999.