OGJ Senior Writer
HOUSTON, Nov. 30 -- Energy prices climbed higher Nov. 29 in the first full day of trading in the New York market after the Thanksgiving holiday in the US, with rising gasoline and distillate fuel prices pulling crude up 2.4%.
It wasn’t as big as the Nov. 24 price rally just before the long holiday weekend, but it wiped out the small losses in the abbreviated New York trading session on Nov. 26. Speculation of colder-than-normal weather in the Eastern US and Europe raised the price of heating oil, said analysts in the Houston office of Raymond James & Associates Inc.
But the price of natural gas fell 4% in the futures market after the US Energy Information Administration reported gas supply increased by 500 MMcfd in September, “confirming speculation of a steadily growing gas supply despite a depressed price environment,” said Raymond James analysts. Prices for both oil and gas were down in early trading Nov. 30.
James Zhang at Standard New York Securities Inc., the Standard Bank Group, reported, “Time spreads continue to narrow. Physical differentials broadly weakened as the [oil] futures price moved higher.”
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “There were no strong fundamental developments yesterday; however, the intraday buying pattern on West Texas Intermediate was a carbon copy of the action of [Nov. 24]. The weekly statistics did not really matter [last week], and the rise of the dollar did not really matter yesterday.”
Considering intraday buying patterns, Jakob said, “It is difficult to say that the scheduled buying is already over. While we do not believe that oil markets should be correlated to the dollar on a tick-by-tick basis (and at times that was clearly the case this year), we do believe oil prices can only be pushed up to a certain limit together with a rising dollar. Interestingly it was in the second half of December 2009 that we saw buying into WTI uncorrelated to the dollar as large speculators were loading up for 2010. That resulted in WTI trading a range in 2010 as the starting price level…was too elevated for the level of demand.”
With the rise of the dollar, North Sea Brent crude’s price equivalent in euros per barrel “has now reached the highest level since April 2008 when crude oil was trading at $110/bbl,” said Jakob. “The world economy could not sustain such prices in 2008 and given the austerity measures being taken in Europe, the Chinese fear of inflation, and the Organization of Petroleum Exporting Countries’ spare capacity, we continue to not see the justification for oil to currently price at 2008 levels.”
Zhang reported, “The rally in the oil market yesterday opened up further divergence between oil and the euro. While the rally between mid-September to early November was driven by dollar depreciation, oil is currently supported by expectation of stronger US economy growth. As a result we believe the data releases on US ISM manufacturing, US jobless claims, and US non-farm payroll later this week will be even more important than usual for the oil market sentiment.”
He said, “The bail-out of Ireland had little impact on the market yesterday. The yields of the 10-year government bonds of Ireland, Greece, and Portugal stayed at their elevated levels.” The euro-dollar exchange rate broke below its 200-day moving average while the Yen-dollar rate broke its 100-day moving average. “The market remains nervous,” Zhang said.
The January contract for benchmark US light, sweet crudes climbed $1.97 to $85.73/bbl Nov. 29 on the New York Mercantile Exchange. The February contract gained $1.92 to $86.27/bbl. On the US spot market, WTI at Cushing, Okla., was at $83.73/bbl on Nov. 29 from $83.26/bbl Nov. 24.
Heating oil for December delivery rose 4.19¢ to $2.36/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month escalated 7.43¢ to $2.28/gal. The January natural gas contract dropped 18.9¢ to $4.21/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., shot up 29¢ to $4.15/MMbtu.
In London, the January IPE contract for North Sea Brent crude was up $1.76 to $87.34/bbl, a healthy premium over WTI. Gas oil for December increased $12.50 to $734.50/tonne.
The average price for OPEC’s basket of 12 reference crudes gained $1.11 to $83.45/bbl.
Contact Sam Fletcher at firstname.lastname@example.org.
MARKET WATCH: Oil price rises; gas price falls with no fundamental market change