FUTURES MOVERS: Nymex crude at a four-session low. Market expects supply rise; Nigeria averts oil strike

By Myra P. Saefong, <a href=cbs.marketwatch.com>CBS.MarketWatch.com Last Update: 3:05 PM ET April 1, 2003

NEW YORK (CBS.MW) -- Expectations for a rise in last week's U.S. oil supplies, combined with reports that Nigeria has averted a strike by petroleum workers, pulled crude futures Tuesday beneath the $30-a-barrel level.

 Underscoring the market's volatility, crude for May delivery traded as low as $29.55 a barrel on the New York Mercantile Exchange. It closed down $1.26 at $29.78 a barrel -- its first close under $30 since March 26. The contract had closed the prior session above $31 a barrel for the first time since March 17.

The overnight high of $31.32 will likely be a short-term cap for the price of crude, said John Person, head financial analyst at Infinity Brokerage Services.

Commodities traders, to be sure, kept eyes trained on war-related developments out of Iraq as well. Notably, a strongly worded statement attributed to Saddam Hussein was read on Iraqi state television, but the Iraqi strongman failed to deliver the remarks himself. See story.

This fueled increasing speculation that Saddam is in hiding, is dead or has been mortally wounded, according to Person.

"Caution is warranted," Person said, following news that a three-day strike was averted in Nigeria, a major oil exporter. Nigeria's largest union called off plans for the walkout, which had been scheduled to start Tuesday.

However, these same factors that seem to pressuring oil prices -- the expectations for a rise in U.S. supplies as well as no strike in Nigeria -- "could prove chimerical with the next headline," Fimat USA analyst Michael Fitzpatrick warned clients Tuesday.

Indeed, ethnic violence continued in the Niger Delta and has spread to Nigeria's Port Harcourt area over the past several days. Production there is still down about 800,000 barrels from its daily pace of 2.2 million barrels because of the clashes, according to an Energy Department analysis.

Eyes on supplies

Meanwhile, market expectations are that there will be another large build in domestic oil stocks. The Energy Department and the American Petroleum Institute are scheduled to issue their weekly inventory reports early Wednesday.

Person expects the reports to show increases of 3.5 million to 4.8 million barrels in crude inventories for the week ended March 28. Tim Evans, a senior analyst at IFR Pegasus in New York is looking for increases of 2 million to 4 million barrels.

As for distillate supplies, Person's looking for a build of 2.3 million barrels, while Evans expects a drawdown of 1 million to 2 million barrels. Distillates include heating oil and jet fuel.

Gasoline inventories likely rose by 1.8 million barrels in the latest week, Person said, with Evans pegging a range of anywhere from a contraction of 1 million barrels to an expansion of 1 million barrels.

Crude supplies stood nearly 17 percent below where they were a year ago, the Energy Department said in its March 26 supply update. Gasoline inventories were 7.5 percent below the year-ago level, while distillate inventories were down by nearly 21 percent. See full story.

Also on Nymex, May heating oil closed at 74.09 cents a gallon, down 2.99 cents, while May natural gas closed at $5.125 per million British thermal units, up 6.5 cents, and May unleaded gasoline retreated 4.28 cents to 91.42 cents a gallon.

The average U.S. price for gasoline at the pump stood at $1.65 a gallon as of early Tuesday, compared with $1.656 on Monday, according to AAA's daily fuel gauge report. Prices have been on the decline since March 19.

In the Nymex metals pits, gold futures eased back on strength in the U.S. dollar. See Metals Stocks.

And in Tuesday's equity action, the Philadelphia Oil Service Index ($OSX: news, chart, profile) inched higher. See Energy Stocks.

The pullback in gold and crude weighed on the Reuters/CRB Index, a broad-based measure of the commodity futures market. The index stood at 230, down 0.6 percent. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

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