Late Day Rally Boosts Oil, Natural Gas
Oil Prices Rally Ahead of OPEC Meeting; Natural Gas Sharply Higher on Pipeline Attacks
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NEW YORK (AP) -- Oil futures climbed in a late-session rally Monday as investors adjusted their holdings ahead of OPEC's Tuesday production-setting meeting. Natural gas futures, meanwhile, jumped after a series of explosions hit natural gas pipelines owned by Mexico's state-owned oil company.
Oil rallied in the last half hour after spending almost the entire day with sharp losses. Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, cited short-covering, or buying by investors who had bet prices would fall. Oil futures traded lower earlier in the day on growing expectations Saudi Arabia is trying to persuade other Organization of Petroleum Exporting Countries ministers to increase production.
However, Flynn noted, "it's far from a done deal." Investors and analysts have long expected OPEC to hold production steady.
Also supporting prices are expectations that oil and gasoline inventories fell last week, and that refinery activity declined. The Energy Department's Energy Information Administration will release last week's inventory data on Wednesday.
"On the inventory numbers, the (predictions) are coming in negative," Flynn said.
Light, sweet crude for October delivery rose 79 cents to settle at $77.49 a barrel on the New York Mercantile Exchange, rebounding from earlier losses of more than $1 a barrel.
Natural gas futures rose nearly 40 cents on news of the explosions in Mexico. While there was no word about who made the attacks, left-wing guerillas have struck the country's natural gas infrastructure in the past. The U.S. imported 12.7 million cubic feet of natural gas from Mexico in 2006, about 0.3 percent of total imports that year.
Natural gas prices were also supported by a tropical "wave" in the central Atlantic that the National Hurricane Center says could develop into a tropical depression over the next couple of days.
Nymex natural gas rose 39 cents to settle at $5.891 per 1,000 cubic feet.
Nymex gasoline futures fell 0.078 cent to settle at $1.9786 a gallon, and heating oil for October added 2.84 cents to settle at $2.1716 a gallon.
In London, October Brent crude rose 41 cents to settle at $75.48 a barrel on the ICE Futures exchange.
At the pump, meanwhile, gas prices fell 0.8 cent overnight to a national average of $2.819 a gallon, reversing a recent trend of rising prices. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May. At the time, an unusual number of refinery outages had futures investors worried that gasoline producers would be unable to supply enough gas to meet peak summer driving demand.
But refiners boosted output over the summer, building gasoline inventories and sending prices steadily lower until late August. Analysts say the recent price increases have been driven by strong demand over the Labor Day weekend and by refiners cutting back production of so-called summer gasoline, which contains fewer pollutants, in favor of cheaper-to-produce winter gasoline, which they can begin selling on Saturday.
OPEC's decision Tuesday could have a big impact on the direction of prices.
"Consulting firm PFC Energy said Saturday it understands that 'Saudi sources have been signaling that OPEC needs to consider a production increase of 500,000 (barrels per day) to 1 million (barrels per day)'" wrote Edward Meir, an analyst at MF Global UK Ltd. in a research note.
OPEC, which produces about 40 percent of the world's oil, has long been expected to hold production levels steady at the meeting, which is part of the reason oil and gasoline prices rose last week. Many OPEC ministers have said oil supplies are fine, blaming refiners for high gas prices.
But the Saudis are worried that high oil and gasoline prices could be pushing some countries toward recession, Flynn said. Their thinking is that reducing prices by boosting output would relieve that pressure enough to stave off recession, which would benefit oil-producing countries in the long run by keeping demand steady.
"If that's the case, it's just what the doctor ordered," Flynn said. |
