MARKET WATCH: Crude slips lower but holds at $80/bbl

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 29 -- The front-month crude futures contract fell for the fourth consecutive session Mar. 26 in the New York market but managed to hold at $80/bbl as the US Department of Commerce slightly reduced its earlier estimate of the fourth quarter 2009 gross domestic product to 5.6%. Natural gas continued its slide below $4/MMbtu.

However, analysts in the Houston office of Raymond James & Associates Inc. reported crude was “bouncing off a 2-week low” in early trading Mar. 29, with prices up 1% as the euro sustained most of its earlier gains against the dollar after European leaders reached a plan to help finance Greece's mounting debt. On the other hand, they said crude appeared largely unaffected by a Mar. 29 report that showed consumer spending rose 0.3% in February while personal incomes were unchanged. Natural gas prices continued to decline after hitting a 6-month low Mar. 26. The April gas contract expires at the close of the Mar. 29 market session.

The Commerce Department’s latest report on consumer spending was down from a 0.4% increase in January and is the smallest increase since September, due in part to snow storms that buried the East Coast for days last month. It is the fifth consecutive month that consumer spending has increased. However, incomes were flat after a 0.3% gain in January. It was the weakest performance since July.

This will be a short trading week due to the Good Friday holiday on Apr. 2. However, Olivier Jakob at Petromatrix, Zug, Switzerland, noted it will be relatively rich in terms of macrodata from reports on personal income, consumer confidence, home prices, factory orders, employment, construction spending, car sales, and nonfarm payrolls.

Jakob said, “As we approach the end of the first quarter, we remain in a configuration where the Chinese exchanges are clearly lagging the relative strong advances made in the Organization for Economic Cooperation and Development stock indices.”

Meanwhile, Raymond James’ recent yearend capital expenditure survey showed 46 public independent exploration and production companies supplying roughly a third of US gas and most of the supply growth one third of total US gas and most of the supply growth plan to spend on average 25% more this year than in 2009. That’s “still 23% down from 2008 levels, albeit in-line with 2007,” the analysts said.

“When you combine technological advancement, hedging profiles, lease terms, improved balance sheets, and higher crude prices, it is easy to understand why companies aren't hesitating to put more money in the ground,” said Raymond James analysts.

Energy prices
The May contract for benchmark US light, sweet crudes dropped 53¢ to $80/bbl Mar. 26 on the New York Mercantile Exchange. The June contract lost 52¢ to $80.47/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 3¢ to $80/bbl, the same as the front futures contract’s closing price. Heating oil for April delivery inched up 0.04¢ but the closing price was essentially unchanged at $2.07/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 1.03¢ to $2.21/gal.

The April natural gas contract fell 10.9¢ to $3.87/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was down 3.5¢ to $3.95/MMbtu.

In London, the May IPE contract for North Sea Brent crude lost 32¢ to $79.29/bbl. Gas oil for April dropped $4 to $660.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes declined 23¢ to $76.80/bbl. So far this year, the OPEC basket has averaged $75.35/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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