Monday, November 19, 2007

Crude Futures Trade Flat

By MATT CHAMBERS (Wall Street Journal)

NEW YORK – Crude-oil futures were little changed in quiet trading Monday, supported by colder-than-normal temperatures in the U.S. Northeast and uncertainty about the dollar, whose weakness has helped crude to recent records.

Light, sweet crude for January delivery on the New York Mercantile Exchange was recently up 3 cents at $93.87 a barrel. Prices rose as high as $95.15 in early screen trading. Brent crude on the ICE futures exchange rose 2 cents to $91.64 a barrel.

Temperatures in the U.S. Northeast, the world's biggest heating oil market, are forecast to be lower than normal going into December, according to National Weather Service climate predictions.

"A lot of the strength seems to be coming from the colder weather, and the OPEC (heads of state) meeting at the weekend" is helping, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "The reasons for today's early rise aren't that solid and I think we could see a fall later in the day."

Organization of Petroleum Exporting Countries' heads of state met over the weekend, but declined to discuss any future production increases to ease higher prices. While there was no mention in the official communique to the dollar, Venezuela and Iran have pushed OPEC to discuss a possible oil currency basket and sought to include a mention of the weakening dollar in the communique.

"A concerted bid to change the OPEC (currency) peg could leave Saudi Arabia in direct conflict with extreme OPEC factions," Mike Fitzpatrick, vice president of risk management at MF Global in New York, said in a research note. Crude "prices also seem to be getting a lift overnight by some OPEC members declaring oil prices to still be undervalued due to the weak dollar."

Large speculators, such as hedge funds and investment banks, slashed their net bets on a gain in futures prices in Nymex crude to its lowest level since August in the week ended Nov. 13, according to the U.S. Commodity Futures Trading Commission.

The speculators cut their net long position in futures to 27,566 from 105,816 a week earlier, according to the CFTC's weekly Commitments of Traders report, released Friday. The net long position is the difference between the number of short positions, or bets on a fall.

Analysts were divided on the implications for crude markets. While some saw a distinct change in sentiment from the large speculators that could drive prices lower, others thought it left more room for them to come back on the long side and push prices higher.

"Combined with the drop in open interest from last week's December contract expiration, (the cut in net longs) provides the market with ample room for the re-establishment of long positions going forward," Addison Armstrong, an analyst at TFS Energy Futures in Stamford, Conn. said in a research note. Open interest, or the number of futures contracts not expired or closed, declined Wednesday and Thursday ahead of Friday's expiration of December crude.

Front-month December reformulated gasoline blendstock, or RBOB, fell 64 points, or 0.3%, to $2.369 a gallon. December heating oil rose 52 points, or 0.2%, to $2.5923 a gallon.

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