MARKET WATCH: Crude oil price hits 5-week high

Sam Fletcher
OGJ Senior Writer

HOUSTON, Feb. 19 -- Crude oil prices continued to climb, hitting a 5-week high Feb. 18 in the New York market despite a government report showing a smaller-than-expected build in total petroleum inventories.

Energy commodities gave back some of their earlier gains from that session after the Federal Reserve raised by 25 points to 0.75% the discount rate it charges banks for emergency loans in a move to tighten credit and strengthen the dollar.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “West Texas Intermediate was at a technical pivot yesterday, and it managed to hold firm on an intraday basis against the dollar.” Gasoline led the rise in oil prices “with the support probably coming from the low gasoline production and import numbers being reported, which will challenge the idea of further builds next week,” he said.

However, the dollar was up and oil and gas prices were down in early trading Feb. 19.

The Energy Information Administration said commercial US crude inventories jumped by 3.1 million bbl to 334.5 million bbl in the week ended Feb. 12, well above Wall Street’s consensus of a 1.7 million bbl gain. Gasoline stocks advanced 1.7 million bbl to 232.1 million bbl, also exceeding a consensus for a 1.5 million bbl increase. Distillate fuel inventories fell 2.9 million bbl to 153.3 million bbl, exceeding analysts’ expectations of a 1.5 million bbl decline but still above average for this time of year (OGJ Online, Feb. 18, 2010).

The American Petroleum Institute earlier reported a 63,000 bbl decline in US crude inventories, a 1.4 million bbl increase in gasoline, and an increase of 1.3 million bbl in distillates.

EIA also reported the withdrawal of 190 bcf of natural gas from US underground storage in the week ended Feb. 12. That left 2.03 tcf of working gas in storage, up 26 bcf from year-ago levels and 53 bcf above the 5-year average.

In other news, Jakob said a leaked “confidential” report from the International Atomic Energy Agency indicates Iran has accomplished nuclear enrichment of 19.8% in its drive to develop atomic power. That comes a week after the White House spokesman said Iranian claims of 20% nuclear enrichment were based on “politics, not on physics.”

The IAEA report “will reactivate the political drive for new sanctions and could attract some fresh buying from asset managers and consumers hedging against the ‘phantom of Hormuz,’” Jakob said, adding, “The fear of Iran has always been instrumental in the price run-ups of 2007 and 2008, fueling the ‘what-if’ scenarios that are necessary for bull runs, and this year might not be different. The narrower contango on crude oil also makes it less expensive to hold crude oil for a premium risk, but recent history has also shown that it is better to cash-in on the ‘Iranium’ hype than to buy and hold forever on it.”

Energy prices
The March contract for benchmark US light, sweet crudes gained $1.73 to $79.06/bbl Feb. 18 on the New York Mercantile Exchange. The April contract increased $1.69 to $79.42/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.73 to $79.06/bbl. Heating oil for March delivery rose 4.49¢ to $2.05/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month advanced 6.21¢ to $2.07/gal.

The March natural gas contract dropped 21.4¢ to $5.17/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 8¢ to $5.39/MMbtu.

In London, the April IPE contract for North Sea Brent crude gained $1.51 to $77.78/bbl. Gas oil for March was up $13.50 to $624.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 16¢ to $74.49/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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