FUTURES MOVERS: Oil futures hold ground above $3
By Myra P. Saefong, CBS.MarketWatch.com Last Update: 11:01 AM ET Jan. 30, 2003
NEW YORK (CBS.MW) -- The prospect of war and falling U.S. supplies of petroleum products kept oil futures solidly above $33 a barrel Thursday. On the New York Mercantile Exchange, the March crude traded at $33.80 a barrel, up 17 cents.
Meanwhile, gold futures held above $367 an ounce with weakness in the U.S. stock market. See Metals Stocks.
The substance and tone of President Bush's State of the Union speech Tuesday night provided support to crude prices, said Michael Cavanaugh, an analyst at Peak Trading Group in Chicago. See speech highlights on CBS News.
The speech "painted a very clear picture to Saddam [Hussein]: Disarm or we are going to do it for you," Cavanaugh said.
But the comments gave the oil market a boost because there was still some uncertainty with the idea of war, he said. "There is no uncertainty anymore."
"As a result, the idea of 'buy the rumor sell the fact,' will weigh heavy selling pressure on the market if no more strong buying comes into the market," he said.
John Person, head financial analyst at Infinity Brokerage Services, disagreed.
Reports indicate that 11 out of 15 U.N. Security Council members are in support of giving more time to the U.N. weapons inspectors, he said.
This could actually indicate that there will not be a "quick resolution" to the Iraq crisis and "keeps the doubt of uninterrupted oil supplies from the Middle East to the U.S. alive in investors minds," he said.
Tightening oil products
Inventory data for crude products, which fell much more than expected, further fueled concerns over supplies.
Distillate inventories declined by 6.8 million to 122.4 million barrels during the week ended Jan. 24, the Energy Department reported Wednesday. The American Petroleum Institute said supplies fell by 7.5 million to 123.1 million barrels.
Fimat USA was looking for a fall of 5 million barrels for distillates and a rise of 1 million barrels for gasoline.
In recent dealings, February unleaded gasoline rose by 2.37 cents to 99.5 cents a gallon and February heating oil traded at 98 cents a gallon, up 0.87 cents. Both petroleum product futures climbed more than 4 percent Wednesday.
"The reality that there is an increase in consumption of by-product without the replacement of raw product had caught traders by surprise," said Person.
"Crude oil inventories are now forecasted to decline next week because of this," he said.
Crude inventories were little changed in the latest week.
Inventories fell by 500,000 barrels, the Energy Department said, but the API posted a 232,000 barrel rise. Total crude inventories stand at 273 million barrels, according to both groups.
Analysts at Fimat expected a decline of 4 million barrels in crude inventories.
Crude inventories are about 45 million barrels below their year-ago level and just above the minimum operational inventory level of 270 million barrels.
Still, Venezuela's production has been slowly climbing, with both President Hugo Chavez and striking oil workers confirming that output has climbed back above 1 million barrels per day, about one-third of normal production.
Natural gas inches up
In other energy news, March natural gas traded higher by 4.1 cents at $5.76 per million British thermal units after a weekly U.S. report revealed a bigger-than-expected decline in last week's supplies.
Natural-gas inventories fell by 247 billion cubic feet to total 1.729 trillion cubic feet in the week ended Jan. 24, the Energy Department said early Wednesday. Fimat forecast a drop of 210 billion cubic feet.
Total stocks are now 681 billion cubic feet less than last year at this time and 190 billion cubic feet below the five-year average, the report said.
Over in the equities arena, most oil service stocks traded higher. The Oil Service Index ($OSX: news, chart, profile) traded up 2.4 percent.
The Reuters/CRB Index, a broad-based measure of the commodity futures market, traded at 246.7, up 0.3 percent amid strength in crude, natural gas and gold futures. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.