IPE Brent crude futures extend decline on warm weather in US

London (Platts)--29Nov2005

IPE Brent crude futures in London continued to slide downwards Tuesday as
temperatures in the US Northeast, the world's biggest heating oil market, are
expected to stay above-average for the next few days. 
     The front-month January IPE Brent contract at 1030 GMT was trading at
$54.30/bbl, down 58 cts from Monday. Earlier in the day during electronic
trading, the contract hit an intraday low of $53.92/bbl. 
     "The rise in heating oil prices (earlier this month) failed to follow
through and so the energy complex is now suffering as a consequence," a
London-based broker said Tuesday morning. 
     Temperatures in Boston, Massachusetts are 11 degrees Fahrenheit above the
seasonal average of 40 Fahrenheit, according to AccuWeather. This is unlikely
to last, as forecasts suggest a decline to below-average in the near future.
     Ahead of the OPEC meeting Dec 12, suggestions are that the cartel
will likely leave production quotas unchanged, essentially adding a further
bearish sentiment to the market.
     OPEC supply is rising for now. PetroLogistics, the tanker-tracking firm,
estimated Monday that production in November was up 600,000 b/d to 30.5-mil
b/d with extra supply coming from Saudi Arabia and Iraq.
     Elsewhere on ICE futures the December-January gasoil intermonth spread
has strengthened almost $5/mt in a week. At 1047 GMT, the December gasoil
futures was trading at a $14 discount to the January contract. 
     This time last year, however, the front two months were in backwardation
with December gasoil $6/mt more than January. At 1048 the December futures
were trading at $494.75/mt, 50cts up from Monday's settle. 
     During thin electronic trading the front-month futures traded at
$489.50/mt, a price not seen since early June.
     The Commitment of Traders report from the Commodities and Futures Trading
Commission Monday showed non-commercials, comprising mainly hedge funds,
extending short positions in crude and natural gas on a futures-only basis.
     Short positions are bets that prices will decline. But they can lead to 
price spikes should traders need to cover their positions in a rising market.
     However, the hedge funds covered some of their short positions in heating
oil. As of Nov 15, non-commercial funds were short heating oil by 8,382
contracts, short crude oil by 56,168 contracts and natural gas by 43,280 lots.
The hedge funds maintained their long position in gasoline by 20,714 lots.

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