MARKET WATCH:Energy prices surge on remarks by Saudi Arabia's oil minister

By OGJ editors
HOUSTON, July 2 -- Energy prices surged Thursday as traders continued to react to an earlier statement by Saudi Arabia's oil minister, Ali al-Naimi, that the Organization of Petroleum Exporting Countries no longer needs to adjust its total production quota now that prices have reached a "fair" level.

That seemed to rule out a proposed increase of 500,000 b/d in August on top of the 2 million b/d increase in OPEC's production quota in early June (OGJ Online, July 1, 2004). OPEC ministers are scheduled to meet again late this month to assess the market situation.

In an unusual move, midsummer trading Thursday was led by a large hike in heating oil futures prices, which generally influence the market only during the peak winter heating season. With US refiners struggling to meet growing demand for gasoline this summer, however, traders are concerned that heating oil may be in short supply this winter.

Energy prices
In a market where price changes usually are measured by fractions of a cent, the new front-month August contract for heating oil shot up by 5.95¢ to $1.08/gal Thursday on the New York Mercantile Exchange. Gasoline for the same month soared by 5.85¢ to $1.2256/gal.

The August and September contracts for benchmark US light, sweet crudes jumped by $1.69 each to $38.74/bbl and $38.83/bbl, respectively, on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.68 to $38.73/bbl. The August natural gas contract inched up by 6.2¢ to $6.217/Mcf Thursday on NYMEX.

In London, the August contract for North Sea Brent crude followed NYMEX prices up by $1.57 to $36.07/bbl on the International Petroleum Exchange. Gas oil for July delivery increased by $16.50 to $338.25/tonne. However, the August natural gas contract dipped by 0.74¢ to the equivalent of $4.14/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes gained $1.32 to $34/bbl Thursday.