Sam Fletcher
OGJ Online
HOUSTON, Mar. 11 -- International energy futures markets continued to climb Friday with a general improvement in market fundamentals.
"Better-than-expected economic data over the past 2 weeks have certainly been a factor in boosting both oil and gas prices," Robert S. Morris at Salomon Smith Barney Inc. said Monday. "However, the rise in both commodities has been largely technically driven."
Natural gas prices, he said, "have especially been driven by technical forces recently, which indicate that further upside may still be ahead this week . . . despite the fact that storage remains on course to exit this winter at the highest level ever for the end of March."
Morris said, "Beyond the current technical run, we do expect natural gas prices to subside over the coming months." However, his long-range favorable outlook for gas has not changed. "We still expect domestic production to drop around 2% this year, while demand should be up nearly 6% due largely to fuel switching that has returned to natural gas and a 2.1% full-year US GDP growth forecast."
Although oil market fundamentals "have exhibited erratic movement, the threat of possible military conflict with Iraq has added a significant 'war premium," said Morris in his weekly exploration and production report.
"In fact, oil prices have gained more than $4/bbl since President Bush's 'Axis of Evil' speech last month," he said.
Morris noted that ministers of the Organization of Petroleum Exporting Countries are scheduled to meet Friday in Vienna and are expected to extend their Jan. 1 quota reductions through the second quarter. Although Russian officials have said it is too early to determine their oil export policy beyond the current quarter, top OPEC officials have expressed confidence that Russia will continue to cooperate in reducing world oil supplies.
The April contract for benchmark US light, sweet crudes added 13¢ to $23.84/bbl Friday on the New York Mercantile Exchange, while the May contract advanced 14¢ to $24.14/bbl. Both continued climbing to $24.24/bbl and $24.53/bbl, respectively, in after-hours electronic trading.
Unleaded gasoline for April delivery gained 0.43¢ to 76.81¢/gal on NYMEX. Heating oil for the same month was up 0.05¢ to 61.94¢/gal. The April natural gas contract added 4.4¢ to $2.80/Mcf
In London, the April contract for North Sea Brent crude inched up 3¢ to $23.33/bbl, while the May position gained 15¢ to $23.60/bbl on the International Petroleum Exchange. However, the April natural gas contract lost 2.2¢ to the equivalent of $2.18/Mcf.
The average price for OPEC's basket of benchmark crudes gained 16¢ to $21.87/bbl Friday, just pennies short of the floor of its targeted price band of $22-28/bbl.
For the week as a whole, that basket price averaged $21.02, up 84¢ from the previous week. So far this year, that basket price has averaged $18.82/bbl, down from $23.12/bbl for all of 2001 and $27.60/bbl in 2000.
Contact Sam Fletcher at [email protected]
