Market watch: Supply concerns push oil futures prices to 2-year highs

By Oil & Gas J .editors ogj.pennnet.com

HOUSTON, Dec. 26 -- Oil futures prices continued a pre-Christmas rally this week, hitting 2-year highs on fears of disruption of crude supplies from Venezuela and Iraq.

On Monday, the February contract for benchmark US light, sweet crudes shot up to $31.95/bbl on the New York Mercantile Exchange—the highest level for a front-month contract since December 2000—before closing at $31.75/bbl, up $1.45 for the day.

The March oil contract also soared by $1.22 to $30.85/bbl Monday on NYMEX. Unleaded gasoline for January delivery jumped by 3.94¢ to 91.86¢/gal. Heating oil for the same month was up 3.67¢ to 89.62¢/gal.

Tuesday, the February oil contract continued to climb, hitting a new high of $32.03/bbl before closing the abbreviated NYMEX session at $31.97/bbl, up 22¢ for the day. The March position advanced 18¢ to $31.03/bbl. Unleaded gasoline for January delivery rose 0.91¢ to 92.77¢/gal Tuesday, while heating oil gained 0.87¢ to 90.49¢/gal that day as snowstorms blanketed the key northeast US market.

The January natural gas contract Monday dropped 6.7¢ to $5.12/Mcf on NYMEX. But it regained 3¢ to $5.15/Mcf in low-volume trading Tuesday. "New weather forecasts will be key to moving the (natural gas) market after the holidays," said analysts Thursday at Enerfax Daily. "Options expire today and the January (gas) contract expires Friday. The Energy Information Administration will release its weekly natural gas storage report Friday, a day late because of the holiday." Enerfax expects EIA to report withdrawal of 100-110 bcf of gas from US underground storage during the week ended Dec. 21.

In London, the February contract for North Sea Brent oil jumped by $1.38 to $29.72/bbl Monday on the International Petroleum Exchange but then pulled back by 11¢ to $29.61/bbl on Tuesday. The January natural gas contract lost 4.9¢ to the equivalent of $3.74/Mcf Monday on IPE but rebounded Tuesday by 4.1¢ to the equivalent of $3.78/Mcf.

Meanwhile, Venezuelan government officials said they expect to have exports of crude and petroleum products back to normal by Jan. 15. Their plan involves firing the striking employees of state-owned Petroleos de Venezuela SA and replacing them with skilled workers from the US, Europe, and Latin American countries.

But striking PDVSA employees and independent observers claim the company cannot resume operations that quickly.