Hurricane, OPEC Optimism Move Energy Futures Higher
NEW YORK (AP) _ Oil futures prices were lower in early trading today as support factors that strengthened the market in recent days began to fade.
Speculation that Hurricane Gilbert would temporarily disrupt gasoline supplies along the Gulf of Mexico coast had fueled a surge in energy prices since Monday.
But early indications today suggested the hurricane might not disrupt oil and gasoline supplies to the extent previously thought.
″People are afraid the hurricane is not going to slam into the refineries afterall,″ said Peter Beutel, an analyst with Elders Futures Inc.
In addition, statements that Iraq would not lower its oil output and instead might raise production also dampened prices, analysts said.
On the New York Mercantile Exchange, wholesale unleaded gasoline for October delivery was trading about 1.57 cents lower at around 45.45 cents a gallon shortly after the market opened. Gasoline had soared 3.21 cents a gallon on Wednesday to settle at 47.02 cents on top of a 1.19 cents rise in Tuesday’s session.
The October wholesale heating oil contract was down about 1.22 cents at 42.85 cents a gallon after rising 2.24 cents a gallon to settle at 44.07 cents Wednesday.
The October contract for West Texas Intermediate, the benchmark grade of U.S. crude, was lower, trading between $15.03 and 15.18 a gallon today. On Wednesday, it soared 84 cents a barrel to close at $15.40 and trading volume was 160,363 contracts, the highest since a record 175,383 contracts were traded last Dec. 17.
On Monday, crude prices had plunged briefly to $13.75, nearly a two-year low, before rebounding and have generally moved higher since then.
The price boosts stemmed partly from speculation that Hurricane Gilbert, which is approaching the Gulf coast, would disrupt gasoline output at refineries along the Texas-Louisiana border as well as offshore oil production. Analysts said although the storm had not damaged the Gulf oil fields, up to 1 million gallons a day of gasoline could be lost if production was halted to wait out the storm.
The approaching hurricane increased demand for gasoline at both the wholesale and retail levels and caused long lines at gas pumps in Texas. But analysts said they did not anticipate any immediate increase in retail prices.
″If the hurricane comes in and does damage it will have an effect on retail prices,″ said Andrew Lebow, senior broker and analyst with E.D.&F. Man International Futures Inc. ″But right now the impact is localized and there is no impact at the pump.″
The overriding element in the market Wednesday involved OPEC-related developments, including an announcement that the cartel’s price monitoring committee would meet later this month, which signaled a possible cutback in OPEC production.
OPEC Secretary-General Subroto announced the cartel’s price monitoring committee would meet Sept. 25-26.
Although members of the committee - Saudi Arabia, Venezuela, Algeria, Indonesia and Nigeria - cannot take pricing or production action, they can call a meeting of the entire 13-member Organization of Petroleum Exporting Countries.
The prospect of such a meeting was enough to move the market, although most traders remained cautious.
″It indicates that OPEC is going to take some action,″ Lebow said.
Reports Wednesday also indicated some members of OPEC had reduced their output. The market turned bearish last week on reports that OPEC was producing 20 million barrels of oil a day, or more than 1 million barrels above the level the market could absorb. Wednesday’s reports indicated OPEC production was down to about 18.5 million barrels, said Peter Beutel, assistant director of Elders Futures Inc.