Crude Seen Leading Commodities Higher in Coming
Days, Fueled by OPEC Cuts
By Stephen Voss
Crude Seen Leading Commodities Higher, Fueled by OPEC Cuts
New York, July 16 (Bloomberg) -- Crude oil's 71 percent
rally this year shows few signs of slowing, and prices may reach
$21 a barrel in coming days for the first time since late 1997,
amid expectations for falling supplies.
OPEC fueled most of the price rise as the producer group
kept its promise to trim output and reduce a surplus that sent
prices tumbling last year. Also, California authorities are
allowing Chevron Corp. to bring in gasoline from other states
after a refinery explosion disrupted local supply. That could
cause tight fuel inventories throughout the U.S.
''A test of $21 is very likely next week,'' said Phil Flynn,
vice president and senior market analyst at Alaron Trading Inc.
in Chicago. ''Most of the news out there is bullish.''
The Bridge-Commodity Research Bureau index ended the week
0.78 point lower at 184.32. The Goldman-Sachs Commodity Index,
though, which is weighted toward energy markets, rose 3.1 to
165.88, its highest since May 4, 1998. In other markets, cattle
prices could fall next week while corn rallies.
Crude oil for August delivery this week rose 68 cents, or
3.4 percent, to $20.62 a barrel on the New York Mercantile
Exchange, the highest for a contract closest to expiration since
Nov. 14, 1997.
Last month, the Organization of Petroleum Exporting
Countries made 94 percent of the 4.3 million barrels a day of the
production cuts it promised to make, according to a Bloomberg
survey. The cuts are set to stay in place until March.
Chevron will probably buy fuel from refineries along the
U.S. Gulf Coast to make up for the expected production shortfall
at the company's refinery near San Francisco. That will deprive
other regions such as the Northeast and Midwest during the peak
driving season.
California, the biggest gasoline-consuming state, suffered
similar refinery problems earlier this year, pushing some retail
prices for high octane fuel as high as $2 a gallon. Prices may
rise back to that level in the weeks ahead, analysts said.
California normally requires a cleaner-burning fuel to be sold
within the state.
Gasoline for August delivery on the Nymex, which measures
wholesale prices, rose 2.96 cents, or 5 percent, this week to
62.55 cents a gallon, the highest for a contract closest to
expiration since Oct. 3, 1997.
Cattle on Feed
Cattle futures could fall next week after a government
report showed a larger-than-expected number of animals entered
U.S. feedlots in June, signaling ample supplies of slaughter-
ready animals in the months ahead.
After trading ended, the U.S. Agriculture Department said 15
percent more young animals entered feedlots last month than in
June last year. Analysts expected an 11 percent increase. Still,
sales of cattle to meatpackers also were a record.
''We see the report as a little bearish, but the strong
number of cattle marketed last month'' could stem the declines,
said Dennis Kissler, a trader with KIS Futures Trading in
Chicago.
For the week, cattle for October delivery fell 0.625 cent,
or 1 percent, to 63.725 cents a pound on the Chicago Mercantile
Exchange. Prices are up about 1 percent from a year ago.
In the week ahead, October cattle could open 0.1 cent to 0.2
cent lower because animals placed into feedlots last month will
reach slaughter weight during October. August cattle could open
0.2 cent higher from 63.7 cents a pound because the record sales
help deplete supplies now available to meatpackers.
The USDA said 1.505 million young animals entered feedlots
during June from 1.314 million in the year-earlier period. Sales
of slaughter-ready animals in June rose 5.7 percent to 1.825
million head from 1.727 million a year earlier, and more than the
3.7 percent increase expected by analysts. The total feedlot herd
rose 4.4 percent to 8.173 million head on July 1 from 7.825
million a year earlier, higher than the 3.3 percent increase
analysts expected.
Ranchers are on track to produce a record 25.87 billion
pounds of beef for steaks, roasts and hamburgers in 1999. That
amount would surpass the previous record of 25.68 billion pounds
set in 1976, suggesting little, if any, increase in grocery
prices over the next several months.
Corn Growth
Corn could rise in the week ahead amid forecasts for
scorching heat in the U.S. Midwest that could slow growth of the
nation's biggest crop.
After trading ended today, the National Weather Service
predicted much-above temperatures in Iowa and Minnesota from July
22 to July 26. That could stunt development in two states that
accounted for 29 percent of the nation's corn crop last year.
''It's all up to Mother Nature for the next four weeks,''
said Steve Bruce, a trader with ED&F Man International Futures
Inc. in Chicago.
For the week, corn for December delivery rose 2.25 cents, or
1.1 percent, to $1.9875 a bushel on the Chicago Board of Trade,
after three straight weekly declines. Earlier this month, futures
prices fell to the lowest level since 1987.
Corn plants have reached a key stage of growth, when
temperatures and rainfall largely determine output. Corn plants
are pollinating, forming kernels on cobs. Hot, dry weather during
this stage can reduce yields.
Barring adverse weather, the 1999 corn crop, which will be
harvested beginning in September, is projected at 9.65 billion
bushels, the third biggest ever, according to the U.S.
Agriculture Department.
©1999 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.
quote.bloomberg.com
|
