MARKET WATCH: Crude oil price rises as dollar value declines

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 3 -- Crude oil prices continued to climb with the front-month contract up 0.6% on a weaker dollar, while natural gas rebounded slightly Nov. 2 in the New York market.

The tone of today’s trading session “is likely to be set by a slew of economic data this morning, paired with the Federal Reserve Bank's decision on monetary easing later in the day. We know it is coming, but how much?” wondered analysts in the Houston office of Raymond James & Associates Inc. “Energy stocks piggybacked on top of oil and outperformed the broader market.”

The latest reports on oil inventories remain “on the back seat” as the market awaits the Fed’s decision on further quantitative easing, to be announced this afternoon at the end of a 2-day meeting, said Walter de Wet at Standard New York Securities Inc., the Standard Bank Group.

Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, said, “The greenback fell 1% against the euro on speculations that an announcement by the Fed about the QE2 is imminent and just around the corner.”

Inventories
De Wet said, “US crude inventory has been at its record seasonal high since May, and the gap between this year’s inventory level and its seasonal average continues to widen. However, the high inventory has hampered the recovery of the crude oil flat price. Front-month West Texas Intermediate has more than doubled from the low seen at end-2008, while the US crude inventory is eyeing the record high set in May 2009.”

The Energy Information Administration reported Nov. 3 commercial US crude inventories increased 2 million bbl to 368.2 million bbl in the week ended Oct. 29, surpassing the Wall Street consensus for a 1.5 million bbl gain. On the other hand, gasoline stocks fell 2.7 million bbl to 212.3 million bbl in the same week although the market anticipated virtually no change. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories dropped 3.6 million bbl to 141.7 million bbl, well past the 1 million bbl decline analysts were expecting.

Imports of crude into the US fell by 885,000 b/d to 8.6 million b/d. The input of crude into US refineries dropped 233,000 b/d to 13.9 million b/d with units operating at 81.8% of capacity.

Energy prices
The December contract for benchmark US light, sweet crudes gained 95¢ to $83.90/bbl Nov. 2 on the New York Mercantile Exchange. The January contract increased 89¢ to $84.56/bbl. On the US spot market, WTI at Cushing, Okla., was reported unchanged at $82.95/bbl. Heating oil for December delivery was up 1.59¢ to $2.29/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month advanced 1.67¢ to $2.11/gal.

The December contract for natural gas regained 3.8¢ to $3.87/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 15.2¢ to $3.27/MMbtu.

In London, the December IPE contract for North Sea Brent increased 79¢ to $85.41/bbl. Gas oil for November gained $4 to $716.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.35 to $81.90/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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