RUSSIA - The Oil Market.World crude oil prices, key to investment in Russia's petroleum, are high as the US may attack Iraq. Surging 50% this year and being a drag on a weakening US economic recovery, the prospect of another price rise turns the focus on the Sept. 19 OPEC OPEC: see Organization of Petroleum Exporting Countries. OPEC in full Organization of the Petroleum Exporting Countries Multinational organization established in 1960 to coordinate the petroleum production and export policies of its ministerial meet in Osaka. Brent futures at the IPE IPE - Integrated Programming Environment have been in contango Contango When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date. Notes: This is the opposite of backwardation. , while the WTI contract at NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). has been in backwardation Backwardation The theory that says futures prices will tend to rise over the life of a contract. Therefore the near-term contracts trade at a higher price than the longer-term contracts. Notes: This is the opposite of "contango. . On Aug. 15, when the September contract at the IPE expired, September Brent was in backwardation at $26.88/b, while Dated Brent on the spot market was $26.57 - with spot WTI at $27.50 and spot Dubai at $25.08. On Aug. 21 September WTI peaked at $30.32 in early trading, while spot WTI traded at $28.80. On that day October Brent was $27.69 with $27.77 for Dated Brent, and Dubai traded at $25.99. October WTI has since remained in backwardation and October Brent is in a shallow contango. Prices have been carrying a $3/barrel war premium. Other than the war factor, the US and European markets tightened in August because of falling crude stocks and a drop in non-OPEC supply caused by field maintenance. In the US, the world's biggest gasoline consumer, the market is fragmented by 24 different "fuel islands" with each using a gasoline reformulation (RFG) different from surrounding areas - which in the summer season causes price spikes for the fuels and WTI. In turn the latter influences Brent pricing. But liquidity in IPE Brent trading is law and the contract faces a crisis which, according to Petroleum Argus of Aug. 19, "could reach a head when October futures expire" on Sept. 13. The months of September through November bear particular scrutiny for the natural gas market in the US which is another factor affecting world oil prices, with the September gas contract at NYMEX having risen to a high of $3.585/m BTU Btu: see British thermal unit. by Aug. 26. The Energy Department's Energy Information Administration (EIA (Electronic Industries Alliance, Arlington, VA, www.eia.org) A membership organization founded in 1924 as the Radio Manufacturing Association. It sets standards for consumer products and electronic components. ) says a hotter-than-normal September or colder-than-normal October and November will eat into storage and thus drive up prices |
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