Sam Fletcher
Senior Writer
HOUSTON, Jan. 10 -- The February crude futures contract fell below $54/bbl in intraday trading Jan. 9 in the New York market while natural gas futures prices continued to rally.
The same reason was given for movements in both markets—weather. Crude prices have been spiraling down for several weeks because winter weather in the Northern Hemisphere has been unusually warm so far. On the other hand, gas futures prices have climbed recently on forecasts that Arctic air will move into the Northwest and spread across the nation in the coming week.
"Winter hasn't really shown up in the Northeast, and the Organization of Petroleum Exporting Countries seems to be lagging in its bid to tighten supplies. We expect to see further jawboning from OPEC, as oil continues to trade at $55[/bbl] levels," said analysts in the Houston office of Raymond James & Associates Inc.
The February contract for benchmark US light, sweet crudes fell to $53.88/bbl Jan. 9 on the New York Mercantile Exchange, the lowest price for a front-month contract since June 2005. It closed at $55.64/bbl, down 45¢ for the day, as trading from the NYMEX pit failed to sustain the early sell off. Nonetheless, the temporary drop below $54/bbl has now weakened support for the February contract at a $55/bbl price, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.
However, Jakob said, "Most of the action is being played" on the March crude contract, which closed at $56.74/bbl, down 62¢ for the day, after trading at $55.10-57.38/bbl on NYMEX. Between Dec. 29-Jan. 8, open interest in the March position increased by a total of 100,000 contracts through NYMEX and Intercontinental Exchange Inc. (ICE) combined, compared with "only 4,400 contracts" for February, he said.
The February market correction "is led by crude oil and results in improving cracks while the action on March crude makes for tighter spreads," Jakob said, adding, "The biofuel commodities remain weak."
Crude inventories
The US Energy Information Administration said Jan. 10 commercial inventories of benchmark US crudes fell by 5 million bbl to 314.7 million bbl during the week ended Jan. 5. Gasoline stocks rose by 3.8 million bbl to 213.3 million bbl in that period, while distillate fuel inventories jumped by 5.4 million bbl to 141 million bbl, with gains in both heating oil and diesel.
US crude imports declined by 621,000 b/d to 9.5 million b/d during the same period. The input of crude into US refineries increased by 74,000 b/d to 15.6 million b/d, however, with units operating at 91.5% of capacity. Gasoline production declined to 9.2 million b/d during that week, while distillate fuel production increased to 4.4 million b/d.
Other energy prices
On the US spot market, West Texas Intermediate at Cushing, Okla., was down 45¢ to $55.65/bbl. Heating oil for February delivery slipped by 0.06¢ but was virtually unchanged at $1.56/gal on NYMEX. The February contract for reformulated blendstock for oxygenate blending (RBOB) inched up by 0.11¢ to remain virtually unchanged at $1.47/gal.
The February natural gas contract escalated by 25.3¢, to $6.63/MMbtu—the highest closing since Dec. 22. On the US spot market, gas at Henry Hub, La., was unchanged at $6.06/MMbtu.
In London, the February IPE contract for North Sea Brent crude lost 42¢ to $55.10/bbl. The January gas oil contract fell $4 to $484.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes dropped 69¢ to $51.17/bbl on Jan. 9.
Contact Sam Fletcher at [email protected].
