Market watch, May 22

Futures prices for oil and petroleum products weakened on international markets, but natural gas continued its climb Friday, spurred on by growing demand and low storage levels. The June contract for gas jumped 11.5� to close the week at $3.83/Mcf on the New York Mercantile Exchange (NYMEX), well on its way to the $4/Mcf mark that many analysts are predicting for this winter.


Futures prices for oil and petroleum products weakened on international markets, but natural gas continued its climb Friday, spurred on by growing demand and low storage levels.

The June contract for gas jumped 11.5� to close the week at $3.83/Mcf on the New York Mercantile Exchange (NYMEX), well on its way to the $4/Mcf mark that many analysts are predicting for this winter.

Potential disruption of Gulf of Mexico gas production by hurricanes or a return to normal winter weather that boosts demand above the levels of recent warm winters could easily drive gas prices higher than $4/Mcf, experts say.

On the International Petroleum Exchange (IPE) in London, gas contracts also rose the equivalent of 9� to $2.89/Mcf.

The June contract for the NYMEX mix of light sweet crudes dropped 44� to $29.89/bbl after briefly pushing past the $30/bbl mark on Thursday. The July contract lost 37� to $29.85/bbl. In after-hours electronic trading, those contracts continued to decline today to $29.60/bbl and $29.84/bbl, respectively.

On the IPE, the July contract for North Sea Brent lost 33� to close Friday at $28.59/bbl in a wave of profit taking. However, brokers said the oil market still looks fundamentally firm and that prices should remain above $28/bbl, barring any surprises.

Although oil stocks have risen in recent weeks, they remain at historically low levels in the face of buoyant demand.

OPEC's average basket price for seven crudes dipped 20� to $28.28/bbl Friday. For the week, the OPEC price averaged $27.97/bbl, up from $26.28/bbl the previous week. So far this year, the OPEC price has averaged $25.48/bbl, officials said.

Kuwaiti Oil Minister Sheikh Saud Nasser Al-Sabah said Sunday that the current level of international oil prices is "fair" and should be sustained. He's among a growing list of OPEC ministers who have indicated opposition to any increase in production at next month's meeting.

Meanwhile, King Fahd Bin Abdulaziz Al Saud of Saudi Arabia approved formation of a team to conduct final negotiations with international oil companies.

Saudi Arabia has relaxed its laws to encourage foreign investors to put more than $100 billion into its post-production oil operations and its growing gas industry. So far, Saudi officials have completed initial talks with 12 international companies selected to present investment offers. Other OPEC members also are seeking substantial outside investments just to maintain their current production levels.

On the NYMEX, the June contract for home heating oil lost 0.99� to close at 78.88�/gal Friday. Unleaded gasoline for the same month dropped 3.7� to 95.33�/gal, with news that the US Environmental Protection Agency (EPA) is considering waiving regulatory requirements for the sale of reformulated gasoline in some areas, to ease recently high prices at the pump.

EPA officials have already granted such a waiver in St. Louis, where gasoline pump prices were reported to be "extraordinarily high." Similar waivers are expected in other areas this summer.

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