Sam Fletcher
Senior Writer
HOUSTON, Aug. 21 -- Energy prices rebounded Aug. 18, ending a 4-day fall, with crude closing once again above $71/bbl as traders tidied their market positions ahead of the weekend.
"Crude oil is set to rise this week after Iran again defied UN demands to stop enriching uranium," said analysts Aug. 21 in the Houston office of Raymond James & Associates Inc. "An official response from Tehran is expected tomorrow, ahead of the Aug. 31 deadline. The Iranian government may cut crude exports in retaliation to any possible UN sanctions," they added.
"Thus far, high oil prices have affected oil demand growth and not overtly economic growth," said Ann-Louise Hittle, head of macroenergy for Wood Mackenzie Ltd., an Edinburgh-based consulting firm. "In the US and most other major markets, economic activity has been remarkably and unexpectedly resilient in the face of several years of rising oil prices."
However, she said, five factors could cause a decline in the US economy: continued lack of oil price stability, a rise in personal savings, a significant decline in house prices, continued increases in interest rates, and a foreign exchange crisis. Any one of those factors may occur without enough intensity to cut economic growth. But a combination of several of them at lower intensity could cause a substantial shock to the US economy, said Wood Mackenzie analysts.
"The outcome would be a genuine shift in market psychology as the image fades of ever-rising oil demand absorbing supply. This image is part of the impetus of investors into buying oil as a commodity play," Hittle said.
Energy prices
The September contract for benchmark US light, sweet crudes closed at $71.14/bbl, up $1.08 for the day, after trading as low as $69.90/bbl Aug. 18 on the New York Mercantile Exchange. The October contract gained 62¢ to $72.10/bbl. Unleaded gasoline for September delivery gained 3.53¢ to $1.97/gal on NYMEX. Heating oil for the same month was up by 2.45¢ to $1.99/gal.
The September natural gas contract increased by 4.2¢ to $6.73/MMbtu. "On the gas front, power plant demand last week slipped from levels seen in late July and early August, further adding pressure to gas prices. Below-average temperatures are expected this week across the eastern half of the country, indicating continued lower gas demand," said Raymond James analysts.
In London, the October IPE contract for North Sea Brent crude gained 72¢ to $72.30/bbl. Gas oil for September increased by $2.25 to $637.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' inched up by 14¢ to $66.99/bbl on Aug. 18. So far this year, the OPEC basket price has averaged $62.97/bbl.
Contact Sam Fletcher at [email protected].
