MARKET WATCH: Gas futures price tops $4/MMbtu

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 23 -- The price of the front-month natural gas contract jumped 4.5% on Apr. 22 in New York after the Energy Information Administration reported a smaller-than-expected injection of 73 bcf into US storage. Oil prices inched up as Greece’s troubled economy pulled down the euro.

“Demand from power and industrial consumers and storage buying have been providing support to [gas] prices around $4[/MMbtu]. However, excess supplies, lack of weather demand, and disincentive to fuel-switching at higher prices is likely to limit any sustained rally at this point,” said analysts at Pritchard Capital Partners LLC in New Orleans.

Meanwhile in Houston, analysts with Raymond James & Associates Inc. said, “Crude barely kept its head above water, trading up a couple cents after news that Greece's budget deficit was larger than estimated, which pressured the euro and propped up the dollar.” At one point in the session, the dollar touched its highest level since May 7.

The crude market shrugged off an increase in existing US home sales that signals stronger fundamentals for an economic recovery, “as the rising dollar curbed further appreciation in prices,” said Pritchard Capital Partners. They said, “Home purchases advanced 6.8% to a 5.35 million annual rate while economists were expecting a rise to a 5.29 million annual rate. There was positive news coming out of the Labor Department as well, which reported that initial jobless applications dropped by 24,000 to 456,000 in the week ended Apr. 17.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “Crude oil prices continue to defy gravity, and [price] dips are continuously bought into. This is maintaining the returns on passive indices just above water in front of a negative roll yield at the start of May.”

However, Jakob said, “The growing problem is that the continued buying into oil commodities is still done despite the rise of the dollar index and on top of it, with [North Sea] Brent [crude] at a premium to West Texas Intermediate, this is starting to make life more difficult for the non-dollar economies that are supposed to fuel the oil demand recovery.” He said, “Brent has no technical momentum; it is still very well supported at $84/bbl but stuck below the resistance of $86.60/bbl and $87.50/bbl.”

Jakob added, “The cost of crude on a dollar-adjusted basis is today at par to the levels of the spring of 2008, and the warning signs emanating from the emerging economies are no different than in 2008.”

In yesterday’s session, Raymond James analysts said, “The market turned itself around, with the Dow Jones Industrial Average down as much as 100 during the day but finished the day up a few points. Energy stocks outperformed as the Oil Service Index was up almost 1.5% while the Standard & Poor’s Oil & Gas Exploration & Production Index was up 1%.” Oil and gas were relatively flat in early trading Apr. 23.

The injection reported by the EIA brought working gas in storage above 1.8 tcf in the week ended Apr. 16. That’s 95 bcf higher than in the comparable period a year ago and 286 bcf above the 5-year average (OGJ Online, Apr. 22, 2010).

EIA earlier said commercial US crude inventories increased 1.9 million bbl to 355.9 million bbl in the same period. Gasoline stocks jumped by 3.6 million bbl to 224.9 million bbl, and distillate fuel inventories were up 2.1 million bbl to 148.9 million bbl (OGJ Online, Apr. 21, 2010). It was “the largest weekly stock build in 47 weeks,” Petromatrix’s Jakob said.

Energy prices
The June contract for benchmark US light, sweet crudes traded at $81.73-84.07/bbl Apr. 22 on the New York Mercantile Exchange before closing at $83.70/bbl, up just 2¢ for the day after dropping 17¢/bbl in the previous session. The July contract was even flatter, up just 1¢ to $85.64/bbl. On the US spot market, WTI at Cushing, Okla., increased 12¢ to $83/bbl. Heating oil for May delivery rose 0.92¢ to $2.22/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 1.75¢ to $2.30/gal.

The May natural gas contract bumped up 17.3¢ to $4.13/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 1.5¢ to $3.98/MMbtu.

In London, the June IPE contract for North Sea Brent crude dipped 3¢ to $85.67/bbl. Gas oil for May gained $4.75 to $705.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was up 35¢ to $82.36/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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