MARKET WATCH: Gas price jumps to 11-month high; oil price dips

Sam Fletcher
Senior Writer

HOUSTON, Dec. 18 -- The front-month natural gas contract jumped 5.6% to an 11-month high Dec. 17 on the New York market after the Energy Information Administration reported the withdrawal of 207 bcf of natural gas from US underground storage.

The withdrawal exceeded the Wall Street consensus as a result of cold weather over most of the US in the week ended Dec. 11.

That dropped the amount of working gas in storage to 3.566 tcf. However, that’s 381 bcf above year-ago levels and 433 bcf above the 5-year average (OGJ Online, Dec. 17, 2009).

“It was cold last week. . .20% colder than the 30-year average and 6% colder than last year,” said analysts in the Houston office of Raymond James & Associates Inc. “Despite the run-up in gas prices, energy stocks were unable to overcome the market's move into the red yesterday (with the Dow Jones Industrial Average down 1.3%) likely due to disappointing jobless claims data.”

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “With the cold weather, stocks of natural gas were drawn during the week at a greater than average pace, but, given the extremely high starting base, the absolute stock levels remain well above recent history.”

Crude again topped $73/bbl in intraday trading before closing down slightly, ending a 2-day rally, “following a retreat to the dollar stemming from concerns over Greece's ability to pay its debts,” Raymond James reported.

Jakob said, “Continued strength in the dollar index kept most of the commodity complex under pressure yesterday, and the evolution of the dollar will remain a strong market input as we . . . approach the end of the year and as the commodity indices are underperforming the equity indices.” He said, “The dollar-led pressure was present for most of the day on West Texas Intermediate but is not that apparent on the front month closing value as a sharp reduction in the contango has moved the front months relatively higher. The WTI time spreads have been volatile for the last week as we approach the [Dec. 21] expiry of the January contract.”

While position management prior to expiry can cause volatility on spreads, there was “likely some short covering” of short spread positions Dec. 17 as Suncor Energy Inc. assessed damage from a Dec. 15 fire at one of the company's two oil sands upgraders north of Fort McMurray, Alta. Preliminary reports indicated no structural damage to the facility, but company officials said production is expected to be reduced 120,000-150,000 b/d during 2-4 weeks of repairs. Suncor said the incident should not impact its 2009 production outlook of 290,000-305,000 b/d.

“Based on the current stock-building rate, the amount of lost production would not be enough to force stock draws but would be enough to leave the stock levels balanced, and this then considerably lowers the potential for the spreads to go into an abnormal contango. In short, the loss of Canadian supply should keep the contango closer to a normal full-carry than to a squeeze value,” said Jakob.

“While the Suncor fire is a new input that needs to force a reassessment of the WTI spread weakness expectation, we would not go overly bullish on it because at the same time the crack values are coming off—and especially so in gasoline,” he said. “The US refinery capacity utilization is low but not low enough to have sustained support on the products. Heating oil has been receiving some support from the colder weather, but data from the American Railroad Association is not yet showing any significant improvement in shipments, which are down 10% vs. the same week of 2008 or 18% vs. 2007.”

Environmental debates continue
Dec. 18 “is (supposedly) the final day of the Copenhagen climate conference, and, after 2 weeks of talks, the rough outline of a summit statement looks generic, toothless, and watered-down. Emissions-cut pledges, verification rules, and financing deals have yet to be finalized,” said Raymond James analysts. “Looks like the talks will stretch into the weekend—though a complete summit breakdown also cannot be ruled out. A key issue to watch: Will the final statement (if any) set a deadline for turning all this into a binding treaty (say Dec. 31, 2010), or will the timing be left open? Either way, there's a long way to go until a treaty emerges that the US Senate can then consider. And Senate approval is by no means assured—just look at Kyoto.”

The summit statement outline is available at (

Raymond James analysts also noted continued political bickering over environmental issues in Washington, DC, where the Environmental Protection Agency's recent decision in principle to start regulating carbon has set off a flurry of debate over its framing of future regulations. “Environmentalists want rules to limit carbon even from small emitters, though the EPA has said it intends to only cover large enterprises. Business groups, meanwhile, are readying litigation to make sure the EPA doesn't act on carbon without a specific mandate from Congress,” the analysts reported.

In other action, the White House unveiled $5.4 billion in new tax credits to create manufacturing jobs in the renewable energy industry over the next 3 years that some are dismissing as “nothing but window dressing,” said Raymond James. Analysts reported, “The idea is to give the credits to producers of clean energy equipment rather than end-users (who already benefit from the investment tax credit and production tax credit), thereby spurring US research and development and manufacturing instead of simply driving imports from Asia. That said, it will take a lot more than $5 billion to eliminate China's cost advantage vs. the US (or Germany) in, say, PV module manufacturing.”

Energy prices
The January contract for benchmark US light, sweet crudes traded as high as $73.13/bbl intraday before closing at $72.65/bbl, down 1¢ Dec. 17 on the New York Mercantile Exchange. The February contract dropped 30¢ to $74.08/bbl. On the US spot market, WTI at Cushing, Okla., was down 1¢ to $72.65/bbl in lock-step with the front-month futures contract. Heating oil for January delivery slipped 0.84¢ to $1.96/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 2.19¢ to $1.85/gal.

The January contract for natural gas jumped $30.6¢ to $5.77/MMbtu on NYMEX. On the spot market, gas at Henry Hub, La., was unchanged at $5.56/MMbtu.

In London, the new front-month February IPE contract for North Sea Brent lost 92¢ to $73.37/bbl. Gas oil for January dropped $11.50 to $591.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was down 40¢ to $71.77/bbl on Dec. 17.

Contact Sam Fletcher at

Related Articles

Latest Texas Petro Index shows ‘economic disconnect’

07/29/2015 The Texas Petro Index (TPI) for June indicates that crude oil and natural gas production and jobs estimates in the Lone Star State increased from M...

Sunbird receives takeover offer from Glendal


Sunbird Energy Ltd., Perth, has received a nonbinding takeover proposal from South African company Glendal Power & Industries.

Report: Old crack caused Canadian pipe break

07/29/2015 The early-2014 rupture of a natural gas pipeline south of Winnipeg, Man., resulted from a fracture at a crack that formed in the pipe wall during c...

MARKET WATCH: Oil futures hover below $48/bbl pending inventory numbers

07/29/2015 The price for light, sweet crude oil for September delivery rose modestly July 28 but still settled just below $48/bbl on the New York market as an...

Murkowski strongly criticizes proposed sale of SPR crude

07/29/2015 A proposal to sell 101 million bbl of crude oil from the US Strategic Petroleum Reserve from fiscal 2018 to 2025 is an incredibly bad idea, US Sena...

Momentum to repeal crude export ban continues to build, Gerard says

07/29/2015 The drive to remove the 40-year-old ban on exporting US-produced crude oil is gaining momentum as more members of Congress recognize the action’s o...

SSE E&P UK buys interest in West of Shetland fields for $876 million

07/29/2015 SSE E&P UK Ltd. has agreed to acquire 20% interest in Laggan, Tormore, Edradour, and Glenlivet fields in the West of Shetland area from Total S...

Senate Banking Committee’s crude export debate breaks along party lines

07/28/2015 Congressional committee debate over the 40-year ban on exporting US-produced crude oil continued to break largely along party lines as the US Senat...

Canada’s NEB approves Orca LNG export license

07/28/2015 Canada’s National Energy Board has approved an application by Orca LNG Ltd., Cypress, Tex., for a 25-year natural gas export license (OGJ Online, J...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


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