MARKET WATCH: Crude oil price falls below $80/bbl

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 16 -- Energy prices fell Mar. 17, with crude dropping 2% to under $80/bbl in the New York market “as the dollar gained ground and Moody's [Investors Service] expressed sovereign debt concerns about France, Germany, the US, and the UK,” said analysts in the Houston office of Raymond James & Associates Inc.

“Natural gas rallied but closed down marginally, just below its 200-day moving average,” they said. However, oil prices were up in early trading Mar. 16 after rebels detonated car bombs around a post-amnesty conference in Warri, Nigeria. That “is a significant change of pattern from bombing oil installations but will nonetheless increase tensions in the region and maintain a certain risk premium for the continued political instability in Nigeria,” said Olivier Jakob at Petromatrix, Zug, Switzerland.

Jakob said the price drops on Mar. 12 and Mar. 15 are a sign of the pending disconnection be oil prices and equities, which have maintained support “while oil prices succumbed to uncertain fundamentals and a dollar index that was relatively well supported.”

He said, “Storing gas oil in Europe does not pay anymore; the end consumer has been reducing stocks of heating oil during this harsh winter, and the question now is whether the end consumer comes to replenish stocks at these relatively high prices on a euro/tonne basis when employment is not showing any signs of real improvement. Data released yesterday shows German demand for gasoline in February down 9.5% vs. last year and diesel down 2.4% while heating oil was down 17%. Some of the low February numbers are surely due to the snow disruptions, but the January-February average is still [down] 7.6% for gasoline, 3.4% for diesel and 27% for heating oil.”

Ministers of the Organization of Petroleum Exporting Countries are arriving in Vienna for their Mar. 17 meeting, but they are not expected to make any changes in their official production quota or their unofficial overproduction. Saudi Arabian Oil Minister Ali Al-Naimi said he is “happy” with current prices.

Meanwhile, the Federal Open Market Committee, the policy-making arm of the Federal Reserve Bank, met Mar. 16. The Fed has held its interest rate for banks at a record low of near zero to encourage economic growth, and a hike is not yet imminent. However, Fed policymakers likely will discuss how to signal an eventual increase to fend off inflation.

In other news, AccuWeather.com said chilly weather is expected to roll across the US Plains starting this weekend, with additional cold snaps through the end of March.

Energy prices
The April contract for benchmark US light, sweet crudes dropped $1.44 to $79.80/bbl Mar. 15 on the New York Mercantile Exchange. The May contract fell $1.46 to $80.08/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.44 to $79.80/bbl. Heating oil for April delivery declined 3.64¢ to $2.06/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased 3.22¢ to $2.22/gal.

The April natural gas contract dipped 0.9¢ to $4.39/MMbtu on NYMEX. “Natural gas is standing still at the support of $4.40/MMbtu” in the futures market, Jakob said. “On a confirmed break of that support level we will move the next target of support to $4.20/MMbtu, then to $4/MMbtu.”

On the US spot market, gas at Henry Hub, La., lost 4.5¢ to $4.31/MMbtu.

In London, the April IPE contract for North Sea Brent crude dropped $1.50 to $77.89/bbl. Gas oil for April fell $16.50 to $649.25/tonne.

The average price for OPEC’s basket of 12 reference crudes lost $1.50 to $76.24/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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