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Gold/Mining/Energy : Oil & Gas Price Economics -- Ignore unavailable to you. Want to Upgrade?

To: jackie who wrote (151)	8/21/1999 7:03:00 PM
From: Ed Ajootian	Respond to of 350

Natural gas still on rise as storm puts rigs at risk Copyright 1999 Houston Chronicle News Services August 20, 1999, 08:12 p.m. NEW YORK -- Natural gas futures rose sharply for the fourth day in a row Friday on the New York Mercantile Exchange as Tropical Storm Bret threatened to shut down Gulf Coast production rigs. Natural gas for September delivery rose 4 cents to $2.938 per thousand cubic feet -- the highest closing price since November 1997 -- amid predictions from the U.S. National Hurricane Center that the storm would strengthen into a hurricane within 24 hours. Prices have risen 8.8 percent since Monday. Chances are low that Bret will veer as far north as Texas before moving inland, yet traders are buying futures anyway to protect against any possible damage to the heart of U.S. natural gas production along the Gulf Coast. "People get all worked up when they hear the word `storm' " said Chris Schachte, a trader at GSC Energy Corp. in Atlanta. "We've heard all the hype about what a huge hurricane season this is supposed to be, so it's natural that people would get a little jittery." Natural gas supplies in storage have fallen 5.6 percent below levels of a year ago after blistering heat forced utilities to power up plants to meet consumer demand from air conditioners and fans running overtime. It now must be replaced ahead of the busy winter heating season, and the threat of production outages for offshore platforms is causing concern that a colder-than-normal fall will bring shortages. About half of U.S. natural gas is produced by offshore and inland rigs in Texas and Louisiana. Offshore rigs are often shut down and evacuated when tropical storms or hurricanes approach. The storm could threaten Mexico's oil shipping ports on the Gulf Coast, including Dos Bocas and Cayo Arcas, though the ports still are open. Natural gas prices are up 25 percent since July 1, which is unusual for the summer, as prices fell in three of the previous four years. A front-month natural gas contract has never traded above $3 during August. Because prices are so much higher than they are historically, some traders had been lulled into selling futures contracts expecting the rally to end, and now must buy them back to cancel the bad bets. "In the summertime, historically, gas is under $2," said Chester Irvin, a trader at ABN Amro in New York. "Everyone kept thinking that it's gotta back off. Then, it doesn't. So, you gotta buy it back. A lot of people were like that." Gas may not get cheaper in the future, either. The average price of futures contracts for each of the next 12 months, known as strips, reached $2.82 per thousand cubic feet -- the highest price since the strips were created almost 9 1/2 years ago. The high prices could finally spur some selling by producers, traders said. "Hedgers have to be out of their minds if they don't sell a good percentage of their production now," said Irvin. Other energy futures finished mostly lower amid profit-taking after the spot crude contract, representing cash prices, jumped above $22 a barrel. October crude fell 12 cents to $21.65 a barrel; September heating oil fell 0.08 cent to 57.42 cents a gallon; September unleaded gasoline fell 0.23 cent to 65.97 cents a gallon. In London, North Sea Brent Blend crude oil for delivery in October rose 9 cents to $20.99 a barrel on the International Petroleum Exchange. Bloomberg News and the Associated Press contributed to this report.

To: jackie who wrote (151)	9/24/1999 12:40:00 AM
From: Ed Ajootian	Respond to of 350

ANALYSIS-Sting in the tail for OPEC success story By Richard Mably VIENNA, Sept 23 (Reuters) - Riding high on oil's wheel of fortune OPEC finds itself master again of the global energy market. How long can it last? Just a year ago the Organisation of the Petroleum Exporting Countries was on its knees. Internal disputes over how to deal with a glut had sent prices crashing below $10 a barrel. Now oil ministers, who on Wednesday endorsed tight export limits, are savouring the prospect of a winter windfall to restore revenues while the West frets that rising energy costs will reignite inflation. Schooled by recurrent surplus, OPEC should have learnt a lot about the oil market in its 39 years of crisis management. Newfound discipline in sticking to output quotas now is helping it reap the benefits of a sea-change in the global oil industry. ``There is a new mindset at work in OPEC. We think oil prices are going to stay above $20 for the next year or two,' said Gary Ross of Petroleum Industry Research Associates. Pledging to maintain supply curbs until April, OPEC may have lit the fuse on a price boom that could take oil near $30 this winter. Traders were betting in that direction on Thursday as benchmark Brent jumped 40 cents to $23.35 a barrel. The turnaround follows OPEC's mismanagement of the oil market which ushered in the crash of 1998. That sent its commercial competitors the multinational oil majors running into each others arms to cut costs. The companies, in careful control of expenditure, so far have been slow to react to the rise in prices -- leaving OPEC some breathing space. For now, the arithmetic of next year's oil market makes happy reading for oil ministers. Paris-based thinktank the International Energy Agency sees nearly two million barrels a day of extra demand and only 700,000 bpd of incremental supply from non-OPEC producers. ``This is the first time since 1985 they are actually in a strong position to administer the price they want. They don't want to short circuit that,' said analyst Mike Rothman of Merrill Lynch. Indications are that surplus inventories will be wiped out by year's end, leaving OPEC room for more than a million barrels daily of extra supply in 2000 without rebuilding stocks. That begs the question of when and by how much it should relax its 4.3 million bpd of export cuts. ``The question now is whether they can engineer a soft landing for the market,' said Mehdi Varzi of Dresdner Kleinwort Benson bank. ``There's been a lot of talk behind the scenes in OPEC already on the subject.' The suspicion as always with OPEC is that cartel talk of stabilising the oil market is merely shorthand among the group's price hawks for pushing prices as high as possible. ``I don't think they've examined the consequences for the market. I think they've been focussed on repairing the damage to their finances,' said Varzi. ``OPEC's maturity as an organisation and its ability to manage the market and prices will be judged on how it deals with this high price environment,' said Raad Alkadiri of Washington's Petroleum Finance Corp. Reminded last year yet again that an all-out pursuit of market share is not in its interest, OPEC appears to have forgotten that sky-high prices also can backfire. ``The flaw is that the economics of oil production mean oil is profitable anywhere in the world at $16,' said Petroleum Finance's Roger Diwan. Most production is much cheaper than that and already oil companies are lifting limits on capital expenditure budgets, said Diwan. High prices also inevitably will raise the temptation for OPEC to leak extra barrels to thirsty refiners. Although Venezuela under President Hugo Chavez has clipped the expansionary wings of state company PDVSA there remains plenty of OPEC spare capacity ready to pump. Better, say analysts, to have an organised exit from output limits than allow a damaging free-for-all. ``It's so easy to extrapolate from the short-term and say that OPEC's worries are over. The question now is can they temper the upside,' said Varzi