MARKET WATCH: Crude, products give up gains from rally

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 2 -- Prices for crude and petroleum products fell Oct. 30, wiping out gains for the previous day’s rally in the New York market, as the dollar strengthened against most currencies and US consumer spending fell amid doubts the economy is improving.

In New Orleans, analysts at Pritchard Capital Partners LLC confirmed, “Crude oil fell on concerns that the US economy is losing its momentum. Consumer spending fell 0.5% in September after a 1.4% increase in August. Some of the decline in consumer spending was attributed to the expiration of stimulus programs such as the ‘cash-for-clunkers’ program. The implication of the lower consumer spending figure is that without stimulus money the consumer will not spend, and the economy will suffer. The Volatility Index (VIX) [on the Chicago Board of Exchange] had its largest 1-day increase in 2009; the VIX jumped 20% to 31. The dollar followed the VIX higher, and the US Dollar Index traded higher pushing crude and commodities lower.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The dollar index being higher was of course a key input into the strong volatility in the equity and oil markets and further volatility is to be expected this week given the avalanche of dollar-important data that will be thrown at the global markets. On the 2009 daily oil-to-dollar correlation, crude oil narrowed some of the gap seen earlier during the week and finished the week only $1/bbl higher than the correlation calculated value.”

However, analysts in the Houston office of Raymond James & Associates Inc. reported Nov. 2, “Crude is rallying off its 2-week low this morning upon news that China's manufacturing sector expanded in October at its quickest pace in over a year and a half, as well as expectations for data from the US manufacturing sector to show a third consecutive month of growth.”

At KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, analysts said, “Whatever doubts we may have about the outlook in the US and other developed countries, it looks as if the Asian economies will power ahead in 2010. The International Monetary Fund published major upgrades to the outlook for most countries. For example, Japan’s gross domestic product growth in 2010 will be 1.7% (vs. 0.5% estimated previously), Australia 2% (vs. 0.7%), China 9% (vs. 7.5%), South Korea 3.6% (vs. 1.6%), and India 6.4% (vs. 5.6%). This is good news for oil demand because all the growth expected in 2010—about 900,000 b/d and possibly more—will come from these countries and the Middle East oil economies. Our old friend the Baltic Dry Index—a good proxy for the health of world trade—went back above 3,000 recently for the first time since early April, having slipped to 2,100 in the meantime. Activity is definitely on the up.”

Raymond James analysts said, “Russia, the world's largest crude producer, increased production 1.8% in October compared to levels seen last year. Additionally, the Organization of Petroleum Exporting Countries’ production for October was the highest in almost a year, averaging 28.76 million b/d, a jump of 80,000 b/d over September. Despite the higher production, encouraging data points of economic recovery have led crude prices to improve over 10% since the start of October. Separately, natural gas is trading relatively flat in the premarket this morning.”

Pritchard Capital Partners said, “Natural gas outperformed the broader market and at one point was up 4% after the Energy Information Administration 914 [monthly natural gas production report] was released. The EIA reported that total US [production] fell 0.5% to 70.22 bcfd. The data shows production is in decline, but declining at a slower rate than seen in July when production declined 1.5%. The decline is a move in the right direction, and we expect the decline to continue in the next report as the rig count decline and the shut-ins weigh on US natural gas production.”

Still the gas market is “becoming more fearful” that 2010 production declines will not be “abrupt enough” to drive prices much above $5/Mcf. Pritchard Capital analysts see a “clear trending up” of gas production from the Marcellus, Haynesville, and Fayetteville shales while other basins are likely shrinking. Meanwhile, Qatar reportedly is cutting its to LNG exports, leading to higher spot cargo prices in Japan and a possible carryover to Europe and the US this week, analysts said.

Energy prices
The December contract for benchmark US light, sweet crudes traded as high as $80.21/bbl before closing at $77/bbl, down $2.87 Oct. 30 on the New York Mercantile Exchange. The January contract lost $2.76 to $77.64/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $2.87 to $77/bbl. Heating oil for November declined 7.31¢ to $1.98/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month dropped 7.58¢ to $1.94/gal.

The December natural gas contract continued to fall, down 1.7¢ to $5.05/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 5¢ to $4.15/MMbtu.

In London, the December IPE contract for North Sea Brent crude dropped $2.84 to $75.20/bbl. Gas oil for November fell $19.25 to $624.75/tonne.

The average price for OPEC’s basket of 12 reference crudes lost 38¢ to $75.56/bbl Oct. 30. So far this year, OPEC’s basket price has averaged $58.25/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

MARKET WATCH: NYMEX oil drops, ending 4-day rally

02/05/2015 Crude oil prices dropped on the New York market Feb. 4 to settle below $50/bbl and to end a 4-day rally after a weekly government report showed oil...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...

MARKET WATCH: NYMEX crude oil prices reach 2015 high

02/04/2015 Crude oil prices surged more than $3/bbl on the New York market Feb. 3, closing at the highest level so far this year, but some analysts believe th...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected