Friday's Commodities Roundup

Posted on Fri, Jun. 06, 2003 Associated Press

NEW YORK - U.S. crude oil futures ended at an 11-week high Friday, as traders covered short positions ahead of a meeting of three key oil ministers.

The oil ministers of Saudi Arabia, Venezuela and non-OPEC Mexico met unexpectedly in Madrid on Friday to discuss market conditions ahead of a meeting of OPEC ministers in Doha, Qatar, next Wednesday.

In a statement released after the market closed, the three ministers - Ali Naimi of Saudi Arabia, Rafael Ramirez of Venezuela and Ernesto Martens of Mexico - pledged to watch the markets closely and to ensure "normal" crude supplies.

While asserting that market fundamentals are in balance, the three officials vowed to ensure fair oil prices.

In recent years, the three countries have coordinated their output policies to keep oil prices relatively high.

Although OPEC is widely expected to leave its output quotas unchanged at the Doha meeting, the unexpected gathering of the three oil ministers served as a reminder global oil producers "intend to keep supplies tight," said Mike Fitzpatrick, an energy analyst at Fimat Futures Inc.

At the New York Mercantile Exchange, the July contract rose 54 cents to close at $31.28 a barrel, the highest settlement for a front-month contract since March 18.

July heating oil gained .95 cent to close at 78.18 cents a gallon. July gasoline gained .83 cent to close at 89.35 cents a gallon.

July natural gas futures fell 1.1 cent to $6.51 per 1,000 cubic feet.

At London's International Petroleum Exchange, July ended with a gain of 34 cents at $27.78 a barrel.

As recently as last month, some OPEC officials, concerned that a flood of oil pumped ahead of the Iraq war and a resumption of Iraqi oil exports would cause a price collapse, had indicated that the group may cut output.

But with oil prices up more than 22 percent over the past four weeks and Iraqi exports of about 2 million barrels a day suspended for a third month, the producer group is now widely expected to keep output quotas unchanged.

OPEC agreed in April to remove about 2 million barrels a day of oil from the market, while simultaneously jacking up its official output ceiling to 25.4 million barrels a day. The agreement went into effect June 1.

Still, the possibility, however remote, of a surprise output cut cannot be discounted, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Indeed, Ramirez, speaking to reporters ahead of the Madrid meeting, didn't rule out the possibility of an output cut at next week's meeting.

But while some analysts see an OPEC move to leave output quotas unchanged to send prices lower, others are convinced that growing signs of strength in the U.S. economy will underpin oil prices.

Fundamentals aside, technical charts point to further short gains, traders and analysts said.

Longer term, however, few analysts expect the recent gains to stick. The reason: a recovery in U.S. oil inventories and the return of Iraq to the market.