MARKET WATCH: Crude futures price slips lower

Sam Fletcher
Senior Writer

HOUSTON, Oct. 8 -- Front-month crude prices slipped lower Oct. 5 on the New York market as the dollar index inched up just 0.4% amid reports European finance ministers are trying to bring down the euro from record highs against the weakened dollar.

The US economy apparently improved with strong employment figures for September, government officials reported Oct. 5.

"[Energy] prices are down now that storms have proved to be no threat to the oil and gas infrastructure in the Gulf of Mexico," said analysts in the Houston office of Raymond James & Associates Inc.

The Société Générale Group in Paris said increased refinery maintenance and retreating refining margins should pull down crude prices through reduced demand. "Refining margins are poor everywhere on a sharp fall last week, except in Singapore," they reported Oct. 8. Even so, they said, "It will take time for lower runs to tighten product balances."

Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, noted that for the third consecutive week benchmark US crude futures continued trading "in a very narrow range, but still near record highs." Although West Texas Intermediate declined a total of 44¢/bbl over all of last week, it is "still $21.45/bbl higher than a year ago," Jakob said.

Moreover, he said, "Large speculators continued to reduce their spread exposure for the third week in a row and are now at par to spread positions of a year ago."

Energy prices
The November contract for benchmark US light, sweet crudes dropped 22¢ to $81.22/bbl Oct. 5 on the New York Mercantile Exchange. The December contract dipped by 2¢ to $80.62/bbl. However, contracts for subsequent months registered gains, although they remained in contango with each priced lower than the prior contract through next September. On the US spot market, WTI was down by 22¢ to $81.23/bbl in Cushing, Okla. Heating oil for November delivery lost 0.78¢ to $2.22/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) dipped 0.29¢ to $2.05/bbl.

The November natural gas contract fell 33.9¢ to $7.07/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 3.5¢ to $6.85/MMbtu. "The natural gas market continues to approach full storage, and last week's storage report indicated that some companies have been shutting in production," said Raymond James analysts. The Energy Information Administration reported injection of 57 bcf of natural gas into US underground storage in the week ended Sept. 28. That was below the consensus of Wall Street analysts and compared with injections of 74 bcf the prior week and 73 bcf in the same period last year. US gas storage now exceeds 3.26 tcf.

In London, the November IPE contract for North Sea Brent crude lost 7¢ to $78.90/bbl. The October gas oil contract, however, gained $12.75 to $691.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased $1.40 to $76.23/bbl Oct. 5. So far this year, the OPEC basket price has averaged $64.03/bbl, compared with an average $61.08/bbl for all of 2006.

Contact Sam Fletcher at samf@ogjonline.com.

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