I am starting to see the whites of there eyes....and it's FEAR all I can say is it's about ***cking time!!! Now is when the real money will be made (or lost), this last year has just been batting practice.... Let the games begin......My UCL is looking better and better.
Top story in WSJ tomorrow morning:
June 13, 2000
Oil Prices Surge as OPEC Argues
Over Proposed Price-Supply Band
By STEVE LIESMAN and ALEXEI BARRIONUEVO
Staff Reporters of THE WALL STREET JOURNAL
The national price for unleaded regular gasoline surged to a record $1.63 a
gallon last week, the government reported, as tight supplies and rising
demand appear to be outstripping political efforts to damp the price rise.
Oil refiners and gasoline station owners blamed the 4.5% rise in just a
week on new government environmental regulations for gasoline, rising
crude oil prices and strong summertime driving demand. But government
officials say supplies are adequate and complained that prices have been
unfairly raised.
The most pressing question now is whether the Organization of Petroleum
Exporting Countries will follow through on its pledge to increase oil output.
Prodded by U.S. Energy Secretary Bill Richardson, OPEC had said it
would increase production, instituting a price band that would automatically
put more oil on the market when the average price of a basket of OPEC
crude oils topped $28 a barrel for 20 days.
But that day came and went last week, and traders have bid up oil prices
in a test of the price band. OPEC flunked the test, analysts said. Saudi and
Venezuelan officials publicly jousted about whether the mechanism was
really automatic or just an indication of when supplies should be increased.
"Anytime there's a price band, traders will test it," says Phokion
Potamianos, oil analyst at DLJ Corp. in New York. "What we have right
now is the trading community second guessing that OPEC doesn't have the
ability to control the upper end of the price band."
Higher crude prices have helped push up both gasoline and natural gas
prices, which in turn have fueled higher oil prices. Traders Monday seized
on the uncertainty to bid up all three commodities. The price of West
Texas Intermediate crude, the U.S. benchmark, rose by $1.53 a barrel to
$31.73.
"The Saudis miscalculated the impact of withdrawing from the automatic
mechanism," says one Houston trader. "They created confusion in an
uncertain market."
Analysts and traders say OPEC members are likely to decide to put as
much as 500,000 barrels a day of additional oil back on the market at their
meeting June 21 in Vienna. That will help but will leave little room for
supply disruptions.
One reason may be that Saudi Arabia wants to keep markets as tight as
possible, says Larry Goldstein, president of the Petroleum Industry
Research Foundation, a New York consulting company. "They will meet
the requirements of the market, but not put out enough oil to build back
stocks to a comfortable level," he says.
The Saudis have insisted they do not want oil to stay at $30 a barrel. But,
says the Houston trader, "we need to hear about production increases, not
prices."
A major reason for the market's jitters is OPEC's limited capacity. Mr.
Goldstein believes that seven out of the 10 OPEC nations (excluding Iraq)
are pumping at capacity. Most of the countries, including Venezuela and
Iran, let their capacity slip when prices fell last year. That creates
uncertainty about whether OPEC members can agree to a production
boost, since only Saudi Arabia, Kuwait and the United Arab Emirates
would reap the benefit.
Tight gasoline markets, which have seen a gallon of regular unleaded
gasoline reach a record average price of $1.63, have also buoyed crude
prices. Starting June 1, about a third of the nation was required to start
using the new environmental gasoline blend. The new gasoline is more
difficult for refiners to blend and has lowered overall gasoline output.
Pipeline problems in the Midwest contributed to pump prices shooting
over $2 a gallon in Chicago recently as refiners struggled to deliver the new
reformulated blend.
The requirements and concerns over a Unocal Corp. patent on the new
gasoline have taken about 300,000 barrels a day of gasoline out of the
system, or about 3% of expected production, Mr. Goldstein says.
High gasoline profit margins are encouraging refiners to buy up oil, with the
odd effect that high gasoline prices are pushing up crude prices.
In addition, low supplies of natural gas also are pressuring oil prices.
Natural gas drilling still hasn't rebounded from the oil price declines of
1998. Rig activity is up in Canada, though not in the U.S., and Canadian
output is running below expectations.
Greater demand from power plants has contributed to a supply crunch that
has pushed futures prices to record levels.
Because inventories are 25% lower than last year, utilities are using natural
gas now that they normally would be storing for the winter, which could
lead to shortages and higher prices later this year. Natural gas prices have
gotten so high that some Northeast utilities have switched to crude-derived
residual fuel oil, Mr. Goldstein says.
Write to Steve Liesman at steve.liesman@wsj.com and Alexei
Barrionuevo at alexei.barrionuevo@wsj.com |
