By OGJ editors
HOUSTON, Feb. 16 -- Energy prices continued to rise Friday, following reports of tighter US inventories of crude and natural gas and an earlier decision by ministers of the Organization of Petroleum Exporting Countries to curb their total production quota by 1 million b/d to 23.5 million in April.
In addition to reducing their official production quota, the 10 active OPEC members, minus Iraq, indicated that they would rein in overproduction of 1.5 million b/d above the current quota of 24.5million b/d (OGJ Online, Feb. 11, 2004). Currently high oil prices would be even higher if OPEC members had not been producing extra oil since late December, analysts said.
Short covering
The New York Mercantile Exchange was dominated by short covering Friday as traders bought to cover open sales contracts ahead of the long weekend. NYMEX was closed Monday because of the US holiday, Presidents' Day.
The March contract for benchmark US light, sweet crudes gained 58¢ to $34.56/bbl Friday on NYMEX, while the April position advanced by 72¢ to $34.10/bbl. Gasoline for March delivery jumped by 2.68¢ to $1.03/gal Friday on NYMEX. Heating oil for the same month was up by 2.36¢ to 94.27¢/gal. The March natural gas contract inched up by 8.5¢ to $5.54/Mcf.
In London, the March contract for North Sea Brent oil increased by 63¢ to $30.57/bbl Friday on the International Petroleum Exchange. Now that OPEC has reduced the threat of an oversupply of oil during the second quarter of this year, a Brent futures price in excess of $30/bbl is now justified, traders said. However, some profit-taking sell offs are likely before prices stabilize, they said.
Gas oil for March delivery gained $5.50 to $259.50/tonne Friday. The March natural gas contract gained 4.8¢ to the equivalent of $4.13/Mcf on IPE.
OPEC's average price for its basket of seven benchmark crudes jumped by 78¢ to $29.74/bbl Friday. However, for all of last week, OPEC's average basket price dipped by 9¢ to $28.67/bbl.
So far this year, OPEC's basket price has averaged $29.79/bbl, up from
$28.10/bbl through 2003 and $24.36/bbl in 2002.
