MARKET WATCH: Cold weather reduces trading, raises gas price

Sam Fletcher
OGJ Senior Writer

HOUSTON, Dec. 28 -- The January natural gas contract inched up 0.7% Dec. 27 in the New York market as cold weather lashed the eastern US, but most energy commodities retreated, giving back some of the gains from Dec. 23.

“The markets remained relatively quiet yesterday, as most investors kept their attention on the holidays,” said analysts in the Houston office of Raymond James & Associates Inc. Heavy snow in New York City and surrounding regions also hindered transportation.

“The snow is not only keeping planes on the ground but also traders at home. Volume on the New York Stock Exchange or the New York Mercantile Exchange was extremely low and should be even lower at the end of the week. In these conditions it is difficult to make strong conclusions about price movements either in equities or in commodities,” said Olivier Jakob at Petromatrix, Zug, Switzerland.

Jakob noted, “The US Federal Reserve will conduct a $6-8 billion primary open market operation (POMO) today, and it is a bit of a joke to conduct such sizeable operations when volume is nonexistent. The Fed’s action today in a market with no participation should be supportive the Standard & Poor’s 500 index, but we will have to also watch the Standard & Poor’s/Case-Shiller home price index.” Meanwhile, he said, “The dollar is again under some pressure and the Shanghai Composite Index is down further, losing another 1.74%” on Dec. 28.

The S&P/Case-Shiller report on Dec. 28 showed home prices fell 1.3% in October.

In a separate report, the Conference Board said consumer confidence in the economy slipped to 52.5 in December, down from 54.3 in November. Economists were expecting an increase to 55.8.

In other news, Raymond James analysts said, “With investors' focus increasingly on next-generation (Gen2) biofuels, one has to look at chemicals as well as transportation fuels to get a complete picture of the Gen2 arena. The reason is that the majority of Gen2 companies, both public and private, are pursuing opportunities in chemicals—and in many cases, chemicals will drive these companies' sales for the foreseeable future. Bio-based chemicals are a substitute for conventional specialty chemicals, many of which are derived from petroleum as well. Specialty chemicals comprise a variety of high-value but relatively limited-volume products, including flavors and fragrances, cosmetics, detergents, and industrial lubricants. The global market for these products exceeds $100 billion. A key point to underscore here is that the per-unit pricing and profitability of specialty chemical products far exceeds that of commodity fuels.”

Energy prices
The February contract for benchmark US sweet, light crudes dropped 51¢ to $91/bbl Dec. 27 on NYMEX. The March contract lost 42¢ to $91.74/bbl. On the US spot market, price data for WTI at Cushing, Okla., were not available. Heating oil for January delivery declined 2.42¢ to $2.52/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased 2.17¢ to $2.42/gal.

The January natural gas contract gained 2.9¢ to $4.11/MMbtu on NYMEX; that contract was scheduled to expire at the close of trading Dec. 28. On the US spot market, gas at Henry Hub, La., dropped 3.8¢ to $4.05/MMbtu.

In London, the February IPE contract for North Sea Brent crude advanced 8¢ to $93.85/bbl. Gas oil for January gas oil was down $1.50 to $777.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped 6¢ to $90.67/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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