MARKET WATCH: Stagnant unemployment rate lifts energy prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 8 -- Energy prices climbed Mar. 5 in the New York market with crude and petroleum products wiping out their losses from the previous session.

The front-month crude price was up 1.6% to the highest closing since Jan. 11 after the US Department of Labor reported 36,000 jobs lost in February, leaving the unemployment rate unchanged at 9.7%. Many economists were expecting a much bigger loss that would raise unemployment to 9.8%.

Olivier Jakob at Petromatrix in Zug, Switzerland, noted the lower-than-expected loss of nonfarm jobs “after a full week of massaging from the White House that the numbers could be terrible on the snow distortion.” He said, “In the end it is still a loss, and there are still 3 million less people employed than last year at the same time and 7.5 million less employed vs. February 2008. The US has lost 6 years of employment, and those that have still got a job are paying 40% more for gasoline at the pump than last year; hence we are not sure that the ‘better than expected’ loss of jobs will translate into much greater gasoline consumption. The only possible positive side to the numbers would be if indeed the snowstorms should have brought a loss of 200,000; then it would translate into ‘weather-adjusted’ job growth. This is, however, a little bit of wishful thinking since even the Bureau of Labor Statistics is not able to properly estimate the storm impact on jobs. Objectively, if the job situation does start to show some growth in the next few months, it will have a material impact on the 2011 driving season rather than the 2010 driving season.”

Jakob said, “Cash held by US banks was about unchanged during the week and the commercial and industrial loans continue to trend lower. We will be more optimistic on the US economy the day we start to see some real job growth combined with a pick up in industrial loans.”

Energy prices
The April contract for benchmark US light, sweet crudes climbed by $1.29 to $81.50/bbl on the New York Mercantile Exchange. The May contract also increased $1.29, to $81.92/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., continued in lock-step with the front-month futures contract, up $1.29 to $81.50/bbl. Heating oil for April delivery advanced 2.87¢ to $2.10/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 3.73¢ to $2.27/gal.

The April natural gas contract was up 1.8¢ to $4.59/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., continued to fall, down 16.5¢ to $4.75/MMbtu.

In London, the April IPE contract for North Sea Brent traded above $80/bbl before closing at $79.89/bbl, up $1.35 for the day. Gas oil for March gained $9.50 to $651.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 85¢ to $77.27/bbl. So far this year OPEC’s basket price has averaged $74.70/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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