FUTURES MOVERS: Oil prices ease as OPEC mulls output

cbs.marketwatch.com By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:10 PM ET March 10, 2003

NEW YORK (CBS.MW) -- Crude futures closed lower Monday with traders mulling the prospect of U.N. approval to give Iraq just one more week to disarm and OPEC members poised to discuss possible changes to its oil production limits.   CBS MARKETWATCH TOP NEWS Techs slap Nasdaq on anniversary of peak Analysts: Bristol's inventory woes not the norm Stocks painted red on anniversary of Nasdaq high Still sinking after all these years Free! Sign up here to receive our Weekly Roundup e-Newsletter!

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On the New York Mercantile Exchange, April crude fell 51 cents to close at $37.27 a barrel after trading between a high of $37.77 and a low of $37.05. Brent for May delivery closed at $32.92, down 22 cents on London's International Petroleum Exchange.

Meanwhile, gold for April delivery closed at $354.80, up $3.90. See Metals Stocks.

The U.S. and Britain are pushing for a U.N. vote on a second resolution that provides a March 17 deadline for Iraq to rid itself of weapons of mass destruction. A vote could come as early as Tuesday, news agencies reported. See Special Report: Countdown to War.

Secretary of State Colin Powell said there was still a "strong chance" of getting up to 10 votes in favor of a second resolution on Iraq, even though France, Russia and China are expected to vote against the document.

"The U.S. position is no longer about avoiding a veto, but of demonstrating that if a veto is used, a majority of the Security Council members support military action," Michael Fitzpatrick, an analyst at Fimat USA, said in a note Monday.

And OPEC members are gathering in Vienna to discuss oil prices and production quotas. They'll attempt to balance a possible shortage of oil in the event of war with a possible glut in supplies as demand declines, as usual, in the second quarter. OPEC, excluding Iraq, has an official production quota of 24.5 million barrels per day. See OPEC preview story.

"War will certainly create a shortfall, especially if northern Kuwait and Iraq go offline for a period of ten days or longer," said John Person, head financial analyst at Infinity Brokerage Services.

The world wants to know how OPEC members will "adjust to increasing supplies to offset any potential supply disruptions," Person said.

Bijan Namdar Zanganeh, oil minister for OPEC member Iran, said Monday that Iran opposes a suspension of production quotas in the event of war. "Iran will not back politically motivated decisions," news agencies quoted him as saying.

Heating oil, natural gas close lower

Also on Nymex, natural-gas and heating-oil futures closed with a loss on the session, following hefty gains Friday.

Forecasts call for above-normal temperatures in much of the U.S. over the next few days.

April heating oil fell back by 2.28 cents to close at $1.0857 a gallon, while April natural gas declined 47.8 cents to $6.515 per million British thermal units.

"It remains highly likely that the U.S. and U.K. are going to war this month against Iraq and that event will be hard on fuel prices," said Todd Hultman, president of commodity information and research provider, Dailyfutures.com.

Even if the U.S. releases oil from its Strategic Petroleum Reserve, the release won't help provide much-needed supplies of heating oil or unleaded gasoline in the short term, he said.

Gasoline futures prices eased back from Friday's gain of nearly 5 percent. April unleaded gasoline fell 2.81 cents to close at $1.1286 a gallon on Nymex.

At the retail level, gasoline prices averaged $1.69 a gallon, up from $1.684 on Friday and a stone's throw away from the all-time high of $1.718 seen in May 2001, according to AAA's Daily Fuel Gauge Report.

In the equities arena on Monday, oil-services companies traded mostly lower, as the Philadelphia Oil Service Index ($OSX: news, chart, profile) chalked up a loss of more than 1 percent. See Energy Stocks.

And the Reuters/CRB Index, a broad-based measure of the commodity futures market, closed at 246, down 0.5 percent amid weakness in energy futures. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.