HOUSTON, Nov. 26 -- The near-month crude contract climbed to a record high, closing above $98 in light trading Nov. 23 in New York, led by record prices for heating oil in the face of apparently tight supplies for the winter season.
"The rise in oil prices was underpinned by a surge in heating oil prices to record highs ahead of colder temperatures expected this winter and by new lows set by the US dollar against the euro," said Robert S. Morris, Banc of America Securities LLC, New York. According to the Energy Information Administration's latest report last week, US heating oil inventories as of Nov. 16 were nearly 25% below both last year's inventory numbers and the 10-year average.
The crude futures market is waiting for a decision on a possible supply increase at the Organization of Petroleum Exporting Countries' scheduled Dec. 5 meeting in Abu Dhabi, said analysts in the Houston office of Raymond James & Associates Inc.
The January contract for US light, sweet crudes gained 89¢ to a new record settlement of $98.18/bbl Nov. 23 on the New York Mercantile Exchange. The February contract climbed 95¢ to $97.13/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 39¢ to $98.18/bbl. Heating oil for December delivery hit a record high of $2.72/gal in intraday trading on NYMEX before closing at $2.70/gal, up 1.68¢ for the day. The December contract for reformulated blend stock for oxygenate blending (RBOB) advanced by 2.99¢ to $2.47/gal.
The December natural gas contract escalated 15¢ to $7.70/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.5¢ to $6.79/MMbtu. Natural gas prices on NYMEX retreated early in the holiday-shortened week which experienced warmer-than-normal temperatures, but then rebounded Nov. 23 on forecasts for lower temperatures this week in the Midwest and Northeast.
Raymond James analysts said natural gas prices surged in premarket trading Nov. 26 because heating degree days were 13% higher than last week's expectations. "Normal weather is expected for next week," they said, which means temperatures should be lower than the same period of 2006. "This is pushing prices higher as well," the analysts said.
In a separate report, Raymond James analysts said, "Increasing US gas production and higher [LNG] imports are the two most important factors underpinning our current bearish stance on the 2008 US gas market." Raymond James' recent survey of publicly traded gas producers showed third quarter US gas production was up 2% from the third quarter of 2006.
"Even though US gas producers are facing an accelerating and steepening treadmill of decline rates, it is clear that something has changed over the past year that is now allowing US gas production to buck the decade-long declining gas well productivity trend," said Raymond James analysts. "Over the past year, it has become clear to us that the Barnett shale (and other less-prolific shale plays) is responsible for this shift in US gas well productivity. The higher initial production rates of these 'resource plays' have, at the very least, temporarily overcome the long-term trend of declining US gas well productivity."
In London, the January IPE contract for North Sea Brent gained $1.26 to $95.76/bbl on Nov. 23. Gas oil for December picked up $7 to $855.75/tonne.
The average price of OPEC's basket of 12 benchmark crudes dropped 16¢ to $91.52/bbl on Nov. 23. So far this year, OPEC's basket price has averaged $67.13/bbl, up from $61.08/bbl for all of 2006.
Contact Sam Fletcher at firstname.lastname@example.org.