Crude oil futures continue rise - 11/22/99 5:40 PM EST (...concerns by the public about potential computer problems...)

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Crude Oil Futures Continue Rise

Story Filed: Monday, November 22, 1999 5:40 PM EST

Crude oil futures prices continued their climb in trading Monday on the New York Mercantile Exchange, reaching a new 8-year high as the market reacted to a decision by Iraq to halt oil exports after rejecting a U.N. offer of a two-week extension of the oil-for-food program.

While crude oil futures surged, natural gas futures prices plunged as much of the country continues to bask in above-normal temperatures. Unleaded gasoline and heating oil futures prices increased.

Iraq's decision to halt exports came in the wake of its rejection of a United Nations Security's Council decision to extend the oil-for-food program for two weeks.

Diplomats say Iraq views the two-week extension of the oil-for-food program as a tactic by the United States and Britain to pressure Russia and China, its closest allies on the Security Council, to agree to a new Iraq policy.

Council members agree on the need to restart U.N. weapons inspections but remain divided on the conditions Iraq must fulfill before U.N. sanctions imposed after Baghdad's 1990 invasion of Kuwait can be suspended.

Russia and China favor the suspension of sanctions soon after Iraq allows U.N. inspectors to return while the United States and Britain are demanding a longer waiting period and Iraqi answers to outstanding questions about its disarmament.

A 3-year-old exemption to economic sanctions allows Iraq to sell $5.2 billion worth of oil every six months to buy food, medicine and other humanitarian supplies as well as to pay reparations stemming from the 1991 Gulf War.

According to U.N. officials, more than $2 billion worth of humanitarian supplies and equipment approved under the program has not yet reached Iraq. And $2 billion from Iraqi oil sales is in an escrow account waiting to be spent.

The market also was boosted by reports that HOVENSA, a joint venture of the state-owned Venezuelan firm of PDVSA and Amerada Hess, is having problems restarting its refinery, which was shut down last week with the approach of Hurricane Lenny.

Light sweet crude for January delivery settled 93 cents higher at $27.07 cents a barrel.

In London, North Sea Brent crude for January delivery rose 71 cents to $25.78 a barrel on the International Petroleum Exchange.

Natural gas futures fell to a contract low Monday, pressured by mild weather in areas of the country where November demand is usually high.

``A warm November doesn't necessarily translate into a warm December and January,'' said analyst Bill O'Grady of A.G. Edwards & Sons Inc. ``November is the (natural gas) storage liquidation season. If you don't get good demand in November, it (the market) is bearish.''

December natural gas was 23.7 cents lower at $2.197 per 1,000 cubic feet.

Unleaded gasoline surged on the New York Mercantile Exchange, receiving a boost from an expected increase in demand due to holiday driving. But also fueling buying were concerns by the public about potential computer problems associated with the arrival of year 2000.

O'Grady noted that traditionally, most people drive with gas tanks half-filled. Fears computer glitches may disrupt electricity distribution and shut down gasoline pumps may prompt consumers to fill their tanks.

Gasoline stocks usually increase by about 25 million barrels during the holiday season, O'Grady said, adding that because of the Y2K fears, that is not likely to happen this year.

December unleaded gasoline was 2.62 cents higher at 75.77 a gallon. December heating oil was 1.38 cents higher at 69.43 cents a gallon.

-- Homer Beanfang (Bats@inbellfry.com), November 22, 1999

Answers

Dumb question, but why did the Amex XOI (oil & gas index) drop 1.8% today? Doesn't it typically follow the futures?

-- questioner (no@spam.com), November 22, 1999.

I just saw on CNN that crude was at $27.07 a barrel. A few weeks ago it was at $18.00 a barrel. Wow!

-- Sharon (sking@drought-ridden.com), November 22, 1999.

The XOI does usually track oil AND GAS economics. Nat gas was off 20 cents on warm weather forecasts. I also heard an oil analyst say the oil service sector hasn't fully reacted to the recent crude oil price rally. Notice the Feb crude is trading a full $1 below the Jan. There's mucho skepticism to this crude move up to $27. Big denial still. The hotshot analysts think as soon as the late year hoarding passes so will tight crude economics.

Here's an even better question: Why was the Dow up 80 points??? Eye Caramba. No one thinks this crude oil price rally and this unfolding shortage is real.

-- Downstreamer (downstream@bigfoot.com), November 22, 1999.


No one thinks this crude oil price rally and this unfolding shortage is real.

That can't be completely true. Big money does the bulk of the trading here, and somebody is obviously betting that it's real. Maybe most folks don't think it's real, but the market isn't artificial.

-- Dog Gone (layinglow@rollover.now), November 22, 1999.


OK Dogger, 'No one' is a bit too strong. I'll stand down.

Why are some of these stock indexes setting new highs? 'cause non of these dumb ass stock brokers and the big money behind them thinks this crude rally and these y2k threats are for real. Go figr...

-- Downstreamer (downstream@bigfoot.com), November 23, 1999.



"Gasoline stocks usually increase by about 25 million barrels during the holiday season, O'Grady said, adding that because of the Y2K fears, that is not likely to happen this year."

-- unlikely unexpecteds (balloon@years.end), November 23, 1999.

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