MARKET WATCH: Crude oil hits 2-year high in intraday trading

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 8 -- The front-month crude oil contract continued climbing Nov. 5 for the fifth consecutive session, hitting a 2-year intraday high of $87.43/bbl at one point before closing a little below $87/bbl in the New York market amid concerns of a protracted period of weakness in the US dollar and risks of inflation.

“The much-heralded decision by the US Federal Reserve to print billions of dollars to help boost the economy, a second round of quantitative easing dubbed by the market as QE2, also helped support oil prices. Indeed, oil prices have risen by more than 15% since the market got wind [last week that the Federal Reserve Bank planned to] buy $600 billion in Treasuries,” said analysts at KBC Energy Economics, a division of KBC Advanced Technologies PLC in Surrey, UK. As a result, they said, “The bulls are once again in the ascendant, and it looks very likely that $90/bbl will be tested within days, although US benchmark West Texas Intermediate still trails North Sea Brent at around $1.50/bbl discount and so may take longer. The US decision, however, risks upping the ante at the [Nov. 11 meeting of the] Group of 20 (G20).”

They noted, “Finance ministers led by the US have been seeking to stop competitive exchange rate devaluations, but it’s difficult to see QE2 as anything but this. Brazil’s finance minister will complain about the Fed’s decision at the upcoming G20 meeting, saying it could aggravate imbalances in the global economy. China, Thailand, and Mexico have all spoken out against QE2, and Beijing spoke of ‘deep bitterness’ about the dollar weakness.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The US equity markets made strong gains in the first days of QE2. The Standard & Poor’s 500 Index was up 3.60% on the week and is now up 9.93% for the year while the NASDAQ was 2.85% higher in the week and is now up 13.65% for the year.”

Jakob said, “The amount of the QE2 was not really a surprise. What was probably more of a surprise was that the Fed is happy to be seen as the official ‘plunge protection team.’ If as expected Republican Ron Paul takes in January the leadership of the subcommittee on domestic monetary policy, it will make for some interesting grilling on Capitol Hill as this is a man that published a book called ‘End the Fed’ and has pushed in the past for an audit of the decision-making at the Federal Open Market Committee [the policy-making arm of the Fed].”

He said, “While QE2 has made selling the dollar a favorite trade, the old European continent continues to suffer from its toxic peripheries and might be starting to show signs of the challenge of maintaining growth while the euro is being bid up.” Data showed foreign orders to German factories are down compared with August “on a slowdown of orders from other European countries but as well from non-European countries,” Jakob said.

“We remember the discussions about quantitative easing back in early 2009 when the Fed was launching QE1 and the risk that some saw for runaway inflation, the need to hedge against inflation, etc.,” he said. “In the end QE1 did not create any core inflation because the money stayed in cash at the banks rather than thrown back into the economy, and it will be interesting to follow the evolution of cash held by banks in the weeks to come to see if QE2 is not a troubled asset relief program (TARP) in disguise.”

Jakob said, “When QE1 was launched, oil prices were at $40/bbl. Oil prices have doubled since then and then the economy started to stall and the expected job creation never came. QE2 is launched with oil prices at $85/bbl, and if the new Fed liquidity is pushed into oil futures then the impact on the economy will be quick but not positive as we are starting QE2 with oil prices at too high of a base. [Fed Chairman Ben] Bernanke stated that he is not worried about higher commodity prices translating into high inflation; that might be true for the measurement of core inflation by the Fed, but it does translate into lower disposable income and especially so for emerging countries.”

Meanwhile, the US government reported nonfarm payroll added 151,000 jobs in October while September was revised higher. “Overall these were better than expected numbers but at the 2010 rate of job additions it will take 6 years to reverse the losses of 2008-09,” Jakob said. However, there was no increase to jobs in manufacturing, where employment has been basically unchanged since May.

Pending home sales for September were down compared with August, and the overall index remains near the historical bottom.

Energy prices
The December contract for benchmark US light, sweet crudes increased 36¢ to $86.85/bbl on the New York Mercantile Exchange. The January contract advanced 32¢ to $87.48/bbl. On the US spot market, WTI at Cushing, Okla., was up 36¢ to $86.85/bbl. Heating oil for December delivery gained 1.17¢ to $2.38/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month inched up 0.29¢ to $2.18/bbl.

The December natural gas contract continued to advance, up 8.1¢ to $3.93/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.4¢ to $3.51/MMbtu.

In London, the December IPE contract for Brent crude increased 11¢ to $88.11/bbl. Gas oil for November lost $2.25 to $735.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was unchanged at $84.33/bbl. So far this year, OPEC’s basket price has averaged $75.86/bbl, up from $61.06 for all of 2009.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected