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MARKET WATCH
Modest gain in oil prices ends 4-day loss

Sam Fletcher
Senior Writer

HOUSTON, Dec. 29 -- Crude futures prices rose modestly Dec. 28, ending a losing streak over four consecutive sessions in the New York market, as the Energy Information Administration reported a larger-than-expected plunge in US crude inventories.

Commercial US oil stocks plummeted by 8.1 million bbl to 321 million bbl in the week ended Dec. 22, primarily because of thick fog along the Houston Ship Channel that earlier hampered imports (OGJ Online, Dec. 20, 2006). Gasoline inventories surged by 3 million bbl to 203.9 million bbl in the same period, while distillate fuel increased by 500,000 bbl to 133.6 million bbl (OGJ Online, Dec. 28, 2006).

Nevertheless, analysts in the Houston office of Raymond James & Associates Inc. said, "Fears of a slowing US economy coupled with mild weather continue to overshadow the bullish crude inventory withdrawals reported over the last couple of weeks. Since Nov. 17, US crude supplies have declined by 20.2 million bbl, the biggest 5-week drop since the hurricane season in 2005."

Another factor "is the escalating militia attacks in Nigeria, not to mention the Iranian confrontation regarding its nuclear ambitions," analysts said. "The geopolitical risk premium may come creeping back into the market."

Energy prices
The February contract for benchmark US light, sweet crudes increased by 19¢ to $60.53/bbl on the New York Mercantile Exchange. The March contract gained 22¢ to $61.78/bbl. On the US spot market, West Texas Intermediate was up 19¢ to $60.54/bbl. Heating oil for January delivery bumped up by 1.43¢ to $1.62/gal on NYMEX. Unleaded gasoline for the same month, however, dipped by 0.54¢ to $1.58/gal.

The February natural gas contract gained 10.6¢ to $6.25/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased by 3.5¢ to $5.57/MMbtu. EIA reported Dec. 29 the withdrawal of 46 bcf of natural gas from underground storage in the week ended Dec. 22. That was below the consensus of Wall Street analysts and down from withdrawals of 71 bcf the previous week and 161 bcf during the same period last year. US gas storage now stands at 3.1 tcf, up by 458 bcf from year-ago levels and 355 bcf below the 5-year average.

In London, the February IPE contract for North Sea Brent crude increased by 15¢ to $60.67/bbl. Gas oil for January lost $4.25 to $520.50/tonne.

Vienna offices of the Organization of Petroleum Exporting Countries were closed Dec. 29 for a holiday, so an update of the group's average basket price was unavailable.

Contact Sam Fletcher at samf@ogjonline.com


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