Crude-Oil Prices Soar

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Crude-Oil Prices Soar to Highest Level Since Persian Gulf War

A WSJ.com News Roundup

NEW YORK -- Crude-oil prices soared to their highest level since the Persian Gulf War Wednesday, while natural gas also set new highs amid continued concerns about shrinking supplies of both commodities ahead of the winter heating season.

At 11:30 a.m. EDT at the New York Mercantile Exchange, October crude oil was up 53 cents, or 1.6%, at $34.36 a barrel. Minutes earlier, it hit a new high of $34.45, eclipsing the previous post-Gulf War high of $34.37 set on March 8. November crude climbed 57 cents, or 1.7%, to $33.55 a barrel after hitting a contract high of $33.60.

October gasoline rose 0.64 cent to trade at 97.35 cents a gallon. October heating oil added 0.58 cent to 98.55 cents a gallon.

The oil market was undeterred by an imminent output increase from the Organization of Petroleum Exporting Countries, as traders awaited weekly inventory data due after the close from the American Petroleum Institute.

OPEC faces growing pressure from consuming nations to increase output to ease prices near 10-year highs, fueled in large part by U.S. oil inventories running at 24-year lows. Analysts and OPEC sources say at least 700,000 to 1.2 million barrels a day are needed.

Despite raising its output quotas by about 2.5 million barrels a day this year without success in driving down prices, most OPEC producers remain opposed to a large production increase, fearing it could cause prices to crash.

OPEC ministers meet in Vienna Sunday, where members are widely expected to increase production quotas by 500,000 barrels a day.

'Iran's opposition to anything more than the 500,000 barrel per day increase under existing policy is probably shared by enough other members to make a larger hike difficult to pass, although we think a repeat of June's 708,000 barrel per day increase may still be in the running,' said Tim Evans, an energy analyst with IFR Pegasus.

'The cartel has always been careful in the past not to reward quota busting and this argues heavily in favor of an adjustment to the output quota,' Mr. Evans said. 'This implies that a real increase of less than the 500,000 to 700,000 barrels per day currently being discussed.'

Many analysts say the market has already priced in that output increase.

'We're expecting 500,000 barrels a day,' said Tom Bentz, an analyst at Paribas Futures. 'If we don't get it, this market will continue higher. Even if we get 700,000 barrels a day, it may not be construed as bearish.'

OPEC officials have blamed market speculation, refinery bottlenecks and high fuel taxes in consuming nations for the recent run-up in crude prices.

The cartel is relying on a price-band mechanism to trigger an output increase, agreed on earlier this year: The group will raise output by 500,000 barrels a day if the price of OPEC's reference basket of crudes stays above $28.00 a barrel for 20 consecutive days.

On Tuesday, the basket price rose to $32.50 a barrel, its 17th straight day above $28.00 a barrel. If prices don't decline dramatically this week, the 20-day mark could be hit as early as Friday.

Also at the Nymex, December natural gas was up 3.6 cents at $5.14 per million British thermal units, extending Tuesday's 12.9-cent surge. Earlier, it hit an all-time high of $5.17, extending Tuesday's rise to record levels.

October natural gas added three cents to $4.98 per million BTUs after rising 11.5 cents in the previous session. Earlier, it hit a new contract high of $5.015.

Traders are awaiting the American Gas Association inventory report at midafternoon Wednesday for indications as to whether supplies are building enough to meet winter demand.

The report is expected to show a build in inventory of 40 billion cubic feet to 65 billion cubic feet of natural gas. The industry is expecting a total build of only 2.6 trillion cubic feet by Nov. 1, the lowest in the last four years. That would be shy of the 3.0-trillion-cubic-feet industry target for the beginning of winter. Natural-gas prices have more than doubled so far this year.

In other commodity markets:

METALS: Precious-metals futures were mixed at the Commodites Exchange in New York. December gold traded down $1.70 at $278 an ounce. December silver gave back 1.5 cents to $5.025 an ounce.

But December palladium jumped $11.35, or 1.6%, to $734 an ounce. October platinum increased $5.70 to $607 an ounce.

Among industrial metals, December copper dropped 0.30 cent to 90.95 cents a pound.

GRAINS AND BEANS: Grains and beans were broadly lower at the Chicago Board of Trade.

December wheat fell 3.75 cents, or 1.4%, to $2.6575 a bushel. December corn dropped 2.75 cents, or 1.4%, to $1.9525 a bushel.

http://dowjones.work.com/index.asp?layout=story_news_main&doc_id=6540



-- Martin Thompson (mthom11027@aol.com), September 06, 2000

Answers

Thanks for keeping us up on the energy situation, Marshall. It is much appreciated.

-- Uncle Fred (dogboy45@bigfoot.com), September 06, 2000.

I would like to thank Marshall also. Where are you Marshall?

-- Martin Thompson (mthom1927@aol.com), September 06, 2000.

Oops! Sorry, Martin.

But what have you got against the name, Marshall? I think it's a good one. It's got a lot of class.

-- Uncle Fred (dogboy45@bigfoot.com), September 06, 2000.


I'd like to throw in my thanks too, Martin (see, I got your name right).

In 1975 I wrote the book, ENERGY FORECAST TO 1990. In those pre-computer days this took a TREMENDOUS amount of tough-digging research. The Web has made it much easier, but news reporting on the vitals has shrunk since everybody has assigned y2k to the trash bin of history.

Thus, with your news hound nose, and wondrous ability to keep us current, I am able to easily stay up with what is happening.

My eternal gratitude.

-- JackW (jpayne@webtv.net), September 06, 2000.


I like Marshall also, But I guess my parents didn't think to much of it.

-- Martin Thompson (mthom1927@aol.com), September 06, 2000.


I read these posts every day, and especially like the in-depth reports on the fuels situation.

-- LillyLP (lillyLP@aol.com), September 06, 2000.

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