MARKET WATCH
Energy prices rebound slightly as market adjusts

Sam Fletcher
Senior Writer

HOUSTON, Dec. 29 -- Energy prices rebounded slightly in a Dec. 28 market adjustment after heating oil prices crashed in the previous trading session on the New York Mercantile Exchange.

Price fluctuations over the last two trading sessions were not based on any marked change in market fundamentals, said analysts who were expecting another bearish report on US inventories of crude and petroleum products.

However, the Energy Information Administration said Dec. 29 that commercial US crude stocks fell by 800,000 bbl to 295.1 million bbl during the week ended Dec. 24, vs. Wall Street analysts' consensus expectations of a 200,000 bbl build and a 10-year average draw of 3.8 million bbl in that period. Distillate fuel inventories also fell by 800,000 bbl, to 119.1 million bbl in the same period, compared with analysts' expectations of a 500,000 bbl decline and a 10-year average build of 670,000 bbl. Heating oil inventories actually declined by 900,000 bbl but were partially offset by increases in diesel fuel. US gasoline stocks increased by 900,000 bbl to 212.3 million bbl, not quite matching analysts' expectations of a 1 million bbl build.

US imports of crude declined by 682,000 b/d to nearly 9.9 million b/d during the week ended Dec. 24. "Imports from Iraq were relatively high last week, while those from Saudi Arabia were lower than average," EIA reported.

Crude input into US refineries increased by 147,000 b/d to more than 15.7 million b/d during the same period, with refineries running at 94.2% capacity, up from 93.4% the previous week. Gasoline production set a weekly record, averaging nearly 9.2 million b/d, EIA said. Heating oil production also increased.

"Meanwhile, with the exception of limited fuel deliveries to Indonesia's Aceh province, it appears at this time that only minor damage was sustained to oil production, refining, and transportation facilities in Southeast Asia as a result of the recent tsunamis," said Robert S. Morris, Banc of America Securities LLC, New York, in a Dec. 29 report. "However, Thailand has lowered its 2005 economic growth forecast to 5.7% from 6%, due to reduced expectations for tourism earnings, although these will be partially offset by increased government spending to rebuild the affected areas," he said.

Energy prices
The expiring January natural gas contract gained 5.3¢ to $6.21/MMbtu Dec. 28 on NYMEX, "buoyed by higher oil prices and steady technical buying after a 5-day losing streak. The market had lost nearly $1.30[/MMbtu], or 17%, in the previous five sessions," said analysts at Enerfax Daily. The new near-month February gas contract increased by 11.6¢ to $6.34/MMbtu.

Heating oil for January delivery, which led the loss in the previous session, rebounded by 1.13¢ to $1.22/gal on NYMEX. Gasoline for the same month inched up by 0.45¢ to $1.05/gal. The February contract for benchmark US light, sweet crudes gained 45¢ to $41.77/bbl Dec. 28 on NYMEX, while the March contract was up by 46¢ to $42.01/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., advanced by 45¢ to $41.78/bbl.

The International Petroleum Exchange in London was closed through Dec. 29 for the Christmas holiday. NYMEX is scheduled to close early Dec. 30 and remained closed Dec. 31 for the New Year's holiday.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined by 49¢ to $34.81/bbl Dec. 28.

Contact Sam Fletcher at samf@ogjonline.com

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