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Oil Prices Up, Natural Gas Regains Ground

Posted on: Friday, 6 January 2006, 09:00 CST

SINGAPORE - Oil prices rose Friday on worries about the Middle East and natural gas prices regained ground as well after sinking to their lowest level in fourth and a half months a day earlier.

Light, sweet crude for February delivery on the New York Mercantile Exchange rose 76 cents to $63.55 a barrel in electronic trading by midday in Europe. Brent crude gained $1.12 to $62.65 per barrel on the ICE Futures exchange.

Despite huge stocks of crude oil and rising inventories of gasoline and distillates, brokers from Sucden Commodity said geopolitical factors such as uncertainties in the Middle East and cold weather in Europe could be enough to keep prices firm.

The firm cited concerns about Israel, where the prime minister's stroke has created uncertainty about regional security, escalating violence in Iraq and festering U.S.-Iran relations.

Heating oil was up 2 cents to $1.8087 a gallon, while gasoline rose more than a cent to $1.8020 a gallon. Prices have been rising since mid-December, and analysts are cautioning that the cost of refined products such as gasoline are likely to rise as the year progresses.

Natural gas rose 35 cents to $9.850 per 1,000 cubic feet, regaining ground lost a day earlier as mild weather in the United States tempered traders' supply concerns and the U.S. Energy Department data showed a surprising increase in natural gas inventories last week.

February natural gas futures had slid 69.8 cents to settle at $9.499 Thursday, the lowest settlement for the front-month contract since Aug. 19, when futures closed at $9.111. Natural gas prices then soared in the aftermath of Hurricane Katrina's destruction of Gulf of Mexico platforms, pipelines and processing plants, and the front-month contract hit its peak of $15.78 on Dec. 13.

In its weekly natural gas report, the Energy Department said underground storage of natural gas in the lower 48 states totaled 2.64 trillion cubic feet last week, an increase of 1 billion cubic feet from the prior week that left inventories 3 percent below year-ago levels. Analysts had been expecting a small decline in inventories.

In a separate report, the Energy Department said commercially available supplies of crude oil declined last week by 1 million barrels to 321.6 million barrels, or 12.5 percent above year ago levels.

Among the flurry of data released by the Energy Department was a detail that highlighted one impact of soaring energy prices in 2005: For the first time since 2001, total demand for petroleum and related products declined from the previous year. Energy demand is closely linked to overall economic activity.

Source: Associated Press/AP Online

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