A nicer Bush and lower prices???

["Denyse Demel" <denysedemel@hotmail.com>]

It is interesting to me that an announcement by the Bush administration has 
such a profound impact on the market. I found this article interesting 
because I had no idea that the impact would follow so closely the 
announcement by the Bush team.
Regarding Bush's more tolerant stance towards Iraq, I believe this is a 
smart move because he will have more time to garner favorable public opinion 
if he does indeed decide to go to war with Iraq.
Hopefully, the Bush team will be able to better explain and demonstrate 
their stance on this issue, with more time.

Market watch: Energy futures prices plummet as US softens stand on Iraq

By OGJ editors

HOUSTON, Oct. 22 -- Energy futures prices plummeted Monday after two White 
House officials indicated on weekend news programs a shift in US policy away 
from ousting Saddam Hussein as Iraq's leader.

US Secretary of State Colin Powell said on a NBC news program Sunday that 
Hussein might be allowed to remain in power if he agrees to give up 
armaments capable of mass destruction. Condoleezza Rice, national security 
adviser to President George W. Bush, said much the same thing on a 
subsequent CNN program.

Those statements were interpreted as "conciliatory" by traders who Monday 
cut deeply into the so-called "war premium" added to oil market prices by 
the perceived risk of military action that could disrupt supplies of Middle 
East crude. The amount of that premium has been variously estimated at 
$1-5/bbl.

However, analysts said there is little chance of a total price collapse with 
inventories at low levels in the face of rising demand.

The November contract for US benchmark sweet, light crudes plunged $1.24 to 
$28.36/bbl Monday on the New York Mercantile Exchange, while the December 
position fell $1.26 to $28.34/bbl. Unleaded gasoline for November delivery 
tumbled 4.14¢ to 81.03¢/gal. Heating oil for the same month lost 4.06¢ to 
76.29¢/gal on NYMEX.

Even the November natural gas position was pulled down 8.2¢ to $4.16/Mcf in 
Monday's sell-off. "The favorite market strategy appears to be selling down 
rallies, with the tumbling crude oil market helping set the pace," analysts 
at Enerfax Daily said Tuesday.

"Weather remains the market's driving force. With colder weather forecasts 
seen across the nation for the next 2 weeks, don't look for the market to 
fall under $4(/Mcf) any time soon," they advised. "But will the bullish 
short-term fundamentals outweigh what appears to be a technical failure? We 
may find the answer today. Despite the cold weather forecast, with petroleum 
products under pressure, it is difficult to maintain those higher prices." 
The November gas contract expires Oct. 29.

Meanwhile on the spot market, natural gas for next-day delivery across the 
US and Canada generally increased by 5-15¢/Mcf Monday, Enerfax analysts 
reported. At the Henry hub, gas for next-day delivery gained 12¢ to 
$4.23/Mcf.

In London, futures prices for North Sea Brent oil also plunged on the 
International Petroleum Exchange, as traders sold out long positions in 
reaction to Powell's comments. The December Brent contract dropped $1.25 to 
$26.59/bbl. Brokers said that sell-off is likely to continue before prices 
stabilize.

The November natural gas contract lost 3¢ to the equivalent of $3.51/Mcf on 
the IPE.

The average price of the Organization of Petroleum Exporting Countries' 
basket of seven benchmark crudes fell 81¢ to $27.19/bbl Monday.

Earlier at a conference on Saudi Arabia's economy in Riyadh, OPEC Conference 
Pres.Rilwanu Lukman defended the need for "appropriate" oil prices. "The 
simple truth is that low prices are incompatible with the levels of 
investments required to ensure secure and adequate supplies envisaged in the 
next 2 decades," he said. "Huge capital outlay will be required to create 
the capacity to supply the world with the level of production" necessary to 
supply projected world demand.

Lukman, who also serves as adviser on petroleum and energy matters to 
Nigeria's president, said global oil demand is expected to grow 40% to more 
than 106 million b/d by 2020 from 76 million b/d currently.

He also said that non-OPEC production is expected to grow steadily for most 
of this decade, with OPEC making only marginal increases in its production.

"The second decade of the century will, however, witness a very dramatic 
shift in sources of supplies, as non-OPEC production reaches peak levels," 
said Lukman. OPEC members control nearly four-fifths of the world's proven 
oil reserves and are well placed to meet the lion's share of total demand, 
he said.






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