Oil wavers near US$64 on upbeat corporate earnings

Source: The Star Online

Oil wavers near US$64 on upbeat corporate earnings



SIOUX FALLS, South Dakota: Oil prices wavered near US$64 a barrel Monday as encouraging quarterly reports from major corporations were offset by what could be an extended period of weak demand for energy.

Benchmark crude for August delivery rose 39 cents to $63.95 a barrel on the New York Mercantile Exchange. Prices neared $65 early on.

The Energy Information Administration this week is likely to report that supplies of gasoline, crude and natural gas in storage rose, said Alaron Trading Corp. analyst Phil Flynn.

If Flynn is right, it could suggest that a run-up in prices this year has been premature.

While crude levels overall have been drained off in recent weeks, there has been a build up at a crucial facility in Cushing, Oklahoma, which not only feeds a number of major refineries but is also where oil traded on Nymex is stored.

After rising again early to start the week, prices essentially flattened by midday. "I think the market is coming back down to earth a little bit," Flynn said.

Still, oil prices continue to be buoyed by the weak dollar and perhaps the political turmoil in Iran. On Friday, the contract jumped $1.54 to settle at $63.56.

Flynn said there is finally some interest in the unfolding events in a major oil-producing country, which could disrupt supplies in the future and possibly force crude prices higher.

Violence in Nigeria, Ecuador and Iran have failed to have the same effect that they would have last year.

Still, negative comments from the CEO of Halliburton helped push natural gas prices lower still.

"Due to continued weakness in natural gas demand ... we believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year," said Dave Lesar, who is also chairman at the oilfield service giant.

Profits for oil service companies like Halliburton Co. and Weatherford International Ltd., which both reported second-quarter earnings Monday, have plummeted all year long.

Natural gas, which had been trading up all morning, fell about a dime to $3.71 per 1,000 cubic feet.

Big users of natural gas, like manufacturers, have been slashing production.

The American Iron & Steel Institute reported a 5.9 percent increase in steel shipments from April to May, and, according to the EIA, U.S. steel mills in 2002 consumed the equivalent of 8.9 percent of the average open interest of the Nymex natural gas contract.

That's encouraging, analyst and trader Stephen Schork said in his morning report, but steel production remains a little more than half of where it was during the 2002 recession, "a stark reminder of how far we had fallen and how far we still have to go."

In other Nymex trading, gasoline for August delivery rose less than a penny to $1.7740 a gallon and heating oil gained 3.24 cents to $1.6734.

In London, Brent prices rose 39 cents to $65.77 a barrel on the ICE Futures exchange. - AP