MARKET WATCH
Energy futures prices fall; natural gas at 7-month low

Sam Fletcher
Senior Writer

HOUSTON, July 23 -- The natural gas futures price hit a 7-month low Tuesday on the New York Mercantile Exchange as a tropical storm dissipated in the Caribbean. Oil futures prices also plummeted in the New York and London markets, but no one seemed to know exactly why.

In an opinion piece published Wednesday in the Wall Street Journal, F.J. Bing West, a former US assistant secretary of defense, connected the sharp fall of oil prices with the deaths of Uday and Qusay Hussein, killed Tuesday in a firefight with US troops in Iraq. "The market immediately reacted by dropping the price of oil," he said.

Stephen A. Smith, founder and president of Stephen Smith Energy Associates, Natchez, Miss., told OGJ there was speculation among traders Tuesday that looting and other resistance to coalition forces in Iraq "may be starting to slow." That speculation may have been triggered by the deaths of the two sons of former Iraqi strongman Saddam Hussein.

Uday Hussein, Saddam's oldest son, headed the Saddam fedayeen, a loyalist paramilitary force. Qusay Hussein was a deputy of the Baath party's military bureau. Remnants of the two groups are suspected of attacks on coalition forces in Iraq since the end of the war. Elimination of two leaders of the resistance might move Iraq closer to pacification and resumption of its oil production and exports, Smith said.

"Natural gas prices came down with oil prices. The problem is, I'm not sure why oil prices came down," said J. Marshall Adkins, an analyst in the Houston office of Raymond James & Associates, St. Petersburg, Fla., who reported Wednesday a continued "fairly bullish outlook" for both oil and gas, based on market fundamentals. Elimination of the Hussein brothers "could have been something of a factor" in Tuesday's market, he said, "but who can say how much?"

NewsEdge Corp. in an online report quoted Agence France Presse as saying oil prices fell after the London-based Centre for Global Energy Studies (CGES) urged members of the Organization of Petroleum Exporting Countries to increase production at their meeting next week to halt rising prices in "world markets still deprived of Iraqi oil."

Other sources attributed the sharp drop in oil futures prices to the expiration Tuesday of the August crude contract on the New York Mercantile Exchange. Reports said most of that sell off occurred in the last hour of the NYMEX trading session.


NYMEX prices
The August contract for benchmark US light, sweet crudes fell by $1.59 to $30.19/bbl Tuesday on NYMEX, while the September position lost $1.34 to $29.49/bbl. Unleaded gasoline for August delivery plunged by 4.35¢ to 88.83¢/gal, wiping out gains from the last three trading sessions. Heating oil for the same month dropped 3.94¢ to 75.64¢/gal.

The August natural gas contract plunged by 23.9¢ to $4.87/Mcf Tuesday. "The market opened down and continued to drop lower until mid-afternoon, when it bounced off the daily low of $4.84(/Mcf) three times in late afternoon trading," analysts at Enerfax Daily reported Wednesday. "The demise of Tropical Depression 6 set off a wave of early selling and set things up to likely head lower today with moderate weather forecasts and a sinking crude oil market pressuring the entire energy complex."

They said, "Technical traders said (Tuesday's) close below the $5(/Mcf) level is a bearish sign and could set the stage for another leg lower."

Natural gas outlook
"The market is paying the price now for $6.50(/Mcf) gas," Smith said. The market earlier spent "5-6 weeks with gas prices over $6(/Mcf)," followed by "a number of weeks over $5(/Mcf). That destroyed a lot of demand," he said.

That in turn freed up enough gas for the recent major build up of US underground gas storage, with injections exceeding 100 bcf during several weeks, including a record injection of 127 bcf of gas during the week ended June 20. At last report, US natural gas storage totaled 1.87 tcf, which is 556 bcf less than year-ago levels and down 300 bcf from the 5-year average.

However, Smith said, "In about 6 weeks, with no major changes (in weather or gas supplies), we'll be back to more normal inventory levels and will start building a surplus" for the coming winter heating season.

Adkins sees natural gas prices now at such a low level that more customers with dual-fuel capacity are starting to switch back to natural gas from alternative fuel oil, although it will take awhile to regain fully those lost markets. Meanwhile, he said, "A couple of weeks of warm weather will shock the market again," pushing natural gas prices higher.

"I think the (price) equilibrium (of natural gas supplies and demand) is above $5(/Mcf), closer to $6(/Mcf)," he told OGJ Online.

Other markets
In London, the September contract for North Sea Brent oil fell by $1.20 to $27.49/bbl Tuesday on the International Petroleum Exchange. The August natural gas contract dipped by 0.65¢ to the equivalent of $2.70/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes lost 81¢ to $27.17/bbl Tuesday.

Contact Sam Fletcher at samf@ogjonline.com

Related Articles

Cidade de Itaguai FPSO anchors in Lula field

07/07/2015 Petroleo Brasileiro SA (Petrobras) reported that the Cidade de Itaguai floating production, storage, and offloading vessel has arrived at the Irace...

AER shuts in 16 Murphy Oil sites in Peace River region for noncompliance

07/07/2015 Alberta Energy Regulator said it has shut in or partially shut in 16 sites operated by Murphy Oil Co. Ltd. in the Peace River region. The sites wer...

MARKET WATCH: NYMEX, Brent oil prices take dive on world oil oversupply concerns

07/07/2015 US light, sweet crude oil prices plummeted more than $4/bbl on the New York market July 6, marking a 5-month low, while Brent crude oil prices on t...

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Production ramps up from Sunrise oil sands project

07/06/2015 Husky Energy Inc., Calgary, reported that 25 well pairs are now on production at its Sunrise oil sands project in northeastern Alberta. Steaming is...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...

AGL Energy to scale back upstream gas operations

07/06/2015

Gas retailer AGL Energy Ltd., Sydney, says it will exit the oil business and massively scaling back its upstream gas operations.

White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected