MARKET WATCH: Crude futures price ends week down 6.6%

Sam Fletcher
Senior Writer

HOUSTON, Nov. 17 -- Despite rallying up 4% on Nov. 13, the front-month crude futures contract fell Nov. 14, finishing the week 6.6% lower than it started as economic declines worldwide fed fears of a slowdown in global energy demand.

Natural gas futures also finished lower in the New York market after the Energy Information Administration reported a 62 bcf injection of gas into US underground storage during the week ended Nov. 7. That brought the amount of working gas in storage to almost 3.5 tcf, 72 bcf less than in the same period a year ago but 117 bcf above the 5-year average.

Meanwhile, the US Commerce Department reported US retail sales fell for the fourth consecutive month, down a record 2.8% in October, including a 5.5% drop in automobile purchases. It marked the first time retail sales have fallen for four straight months since 1974. Falling gasoline prices accounted for about half the loss in October sales, down a record 12.7% at retail pumps as the average price for gasoline dropped 17% vs. September's average price.

Despite earlier talk of a possible "Bretton Woods II"—named for the 1944 meeting in New Hampshire of delegates from 44 nations who established a postwar international monetary system of convertible currencies, fixed exchange rates, and free trade—the weekend meeting in Washington, DC, of the Group of 20, a forum of the world's largest economies, produced no concrete plan for dealing with the current economic crisis. Instead, they issued a communique calling for domestic stimulus responses and appointing a new regulatory "college of supervisors" to report Mar. 31, 2009, on various issues ahead of G-20's April meeting.

Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. noted, "The International Monetary Fund needs at least $100 billion in extra funding over the next 6 months." IMF and the World bank were established at the original Bretton Woods meeting to provide economic aid for reconstruction of Europe after World War II.

In Arlington, Va., analysts at Friedman, Billings, Ramsey & Co. Inc. (FBR) reported Saudi Arabia and China resisted international pressure at the G-20 meeting to donate to IMF, "although Japan offered $100 billion in reserve assets to supplement IMF bailout funds this weekend."

Raymond James analysts said, "This weekend, Japan, the second-largest economy, formally slipped into a recession after the economy retracted 0.1% in the third quarter." FBR analysts said the European Union's statistical body reported that Euro-zone gross domestic product declined 0.2% for the second consecutive quarter, as well, which may spur the European Central Bank to take further action on rates at its Dec. 4 meeting.

Energy prices
The December contract for benchmark US light, sweet crudes traded at $55.69-59.96/bbl Nov. 14 before closing at $57.04/bbl, down $1.20 for the day on the New York Mercantile Exchange. The January contract lost $1.46 to $57.60/bbl. Heating oil for December dipped 4.32¢ to $1.83/gal on NYMEX. The December contract for reformulated blend stock for oxygenate blending (RBOB) declined by 6.33¢ to $1.24/gal.

Natural gas for the same month slipped 0.6¢ to $6.31/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 2¢, also to $6.31/MMbtu.

In London, the new January front-month IPE contract for North Sea Brent crude dropped $2 to $54.24/bbl. Gas oil for December gained $4.25 to $578.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes rose $1.36 to $49.09/bbl on Nov. 14. Despite the recent drop in oil prices, the OPEC reference basket has averaged $101.77/bbl so far this year.

Contact Sam Fletcher at samf@ogjonline.com.

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