MARKET WATCHEnergy futures prices continue climb to new highs

May 5, 2004
Energy futures prices continued to climb Tuesday, spurred by continued violence in the Middle East and expectations of bearish government and industry reports Wednesday of US inventories.

By OGJ editors

HOUSTON, May 5 -- Energy futures prices continued to climb Tuesday, spurred by continued violence in the Middle East and expectations of bearish government and industry reports Wednesday of US inventories.

Gasoline for June delivery soared to a new high on the New York Mercantile Exchange, up by 4.38¢ to close at $1.3058/gal after trading as high as $1.3095/gal in that session. Heating oil for the same month jumped by 2.02¢ to 98.81¢/gal.

The June contract for benchmark US light, sweet crudes escalated by 77¢ to $38.98/bbl, after registering Monday the highest settlement price on NYMEX since Oct. 16, 1990. The July position advanced by 76¢ to $38.75/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 75¢ to $38.98/bbl.

The June natural gas contract closed at $6.27/Mcf Tuesday on NYMEX, up by 3.8¢ for the day, after trading as high as $6.36/Mcf during that session. That marked a second record high for that contract in two consecutive sessions. The July natural gas contract also hit a new benchmark high of $6.43/Mcf Tuesday before settling at $6.35/Mcf, up by 3.7¢ for the day. "Slightly warmer forecasts for later this week, particularly in Texas and the South, and firm crude oil prices helped trigger some buying despite a huge storage surplus compared [with] last year," said analysts Wednesday at Enerfax Daily.

The International Petroleum Exchange in London was closed Monday for a public holiday, but the June contract for North Sea Brent crude shot up by $1.45 to $35.93/bbl Tuesday, the highest level in more than 13 years, analysts said. Gas oil for May delivery gained $12 to $321/tonne Tuesday. The June natural gas contract increased by 3.8¢ to the equivalent of $3.62/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 58¢ to $34.71/bbl Tuesday.

Some traders now expect crude futures prices to push above $40/bbl with continued political instability in the Middle East. Some analysts contend that rising crude prices are hurting the economies of major consumer countries and will force OPEC members to increase production. However, OPEC members so far have resisted such pressures, blaming rising prices on speculators and political forces beyond their control.