Crude Pushes Higher on Cold
By Kristina Shevory
TheStreet.com Staff Reporter
12/12/2005 12:10 PM EST
URL: thestreet.com
Updated from 9:54 a.m. EST
Energy prices rose Monday as frigid weather blanketed the Northeast and talk of a major acquisition swirled in the natural gas sector.
Crude for January delivery gained 71 cents to $60.10 a barrel, heating oil added 1 cent to $1.74 a gallon, and unleaded gasoline rose 1 cent to $1.62 a gallon.
Natural gas rose 34 cents to $14.65 per million British thermal units after a published report said ConocoPhillips (COP:NYSE) is negotiating to acquire Burlington Resources (BR:NYSE) for more than $30 billion. The deal would make the combined company the largest natural gas producer in the country. About 80% of the target company's assets are in North American natural gas.
News of the deal drove shares of Burlington up 7.2% to $81.57, and propelled other natural gas companies higher. EnCana (ECA:NYSE) rose 2.2% to $51.16, Devon Energy (DVN:NYSE) jumped 2.3% to $66.77, and Anadarko Petroleum (APC:NYSE) increased 1.8% to $98.58.
ConocoPhillips shares shed 3.9% while shares of fellow supermajors Exxon Mobil (XOM:NYSE) , BP (BP:NYSE ADR) and Chevron (CVX:NYSE) were all up a little over half a percent.
In Kuwait, the Organization of the Petroleum Exporting Countries, which supplies about 40% of the world's crude, agreed at its meeting Monday to keep pumping at near 25-year highs to meet rising world demand.
"We don't want to scare the market'' at a time of rising demand, Sheikh Ahmad al-Sabah, OPEC's president and Kuwait's energy minister said at the meeting, Bloomberg reported. "The winter has started, and it looks like it will be a cooler winter."
After Hurricane Katrina shut down much of the Gulf of Mexico's oil and gas production, OPEC offered all its capacity to the world markets through 2005. The group of 11 oil producing countries usually pumps 28 million barrels a day, but has disregarded its quota to supply rising demand.
OPEC will maintain the current output until its next meeting on Jan. 31. At that time, the group may cut its daily output by around 2 million barrels if its index of oil prices or "basket price" drops to $40 or $45 a barrel, said Fathi Ben Shatwan, Libya's energy secretary, Bloomberg reported. OPEC's basket price was $53.95 on Friday.
At this time of year, energy prices tend to rise and fall on cold weather in the Northeast, the largest domestic consumer of heating oil, and the past few weeks have been no different. Crude prices marched past $60 a barrel three times last week, and may stay at those highs this week if the weather remains as cold as predicted.
OPEC's decision, widely expected after several members said they supported maintaining output at current levels, comes as unseasonably cold temperatures grip most of the country and 1 to 3 inches of snow is predicted in the Northern U.S. starting Wednesday. December may become one of the 10 coldest Decembers since the late 1800s, Joe Bastardi, an expert senior meteorologist at AccuWeather, a State College, Pa., weather forecaster, said.
The cold weather coupled with an intense bout of traders covering their short positions or bets prices will fall, also helped push up energy prices Monday. OPEC's decision Monday will likely set $60 a barrel as the new "floor" or minimum for oil through the first quarter.
"I think it's very possible we could retest those highs and oil will trade in a band from $53.50 to $62.50 in the next few months," said Bruno Stanziale, director in the commodities trading group at Societe Generale in New York. |
