MARKET WATCH: Crude tops $90/bbl for first time in 26 months

Sam Fletcher
OGJ Senior Writer

HOUSTON, Dec. 27 -- Crude climbed above $90/bbl Dec. 23 in the New York market for the first time since October 2008, due to increased demand from US holiday travel and cold weather on the East Coast.

“A bullish crude inventories report…also provided some support to prices,” said analysts in the Houston office of Raymond James & Associates Inc. “Unfortunately, China stepped in as ‘The Grinch,’ raising its benchmark 1-year lending and deposit rates to cool its red hot economy, snapping oil's rally.”

The Energy Information Administration said last week commercial US crude inventories fell 5.3 million bbl to an above-average 340.7 million bbl in the week ended Dec. 17, exceeding Wall Street’s consensus for a 3.4 million bbl drop. Gasoline stocks grew by 2.4 million bbl to 217.2 million bbl, EIA reported, outstripping analysts’ predictions of a 1.5 million bbl increase. Gasoline stocks also are above average for this time of year with both finished gasoline and blending components increasing. Distillate fuel inventories decreased 600,000 bbl to 160.7 million bbl, just above average. The markets had expected no change.

On the last trading day before Christmas, Raymond James reported, “The broader markets remained little changed as investors looked forward to a long weekend with friends and family, while energy indices were marginally up. Prior to the opening bell, oil, gas, and the broader market are all looking to open in the red as traders begin to balance their checkbooks after spending a little too much on Christmas presents.” The National Weather Service's Jan. 1-5 outlook is for a high probability of below-average temperatures to descend upon the western half of the US.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “US stocks were up again for the week.” The Standard & Poor’s 500 index gained 1.03% in the week. It was up 12.7% for the year to date and 6.46% for December, with most gains in the energy and financial sectors.

Jakob noted some of the “most influential” financial institutions expect the S&P to return to early 2007 levels in the coming year. However, he said those levels can not obtained without a strong energy sector, which would require oil prices of $100/bbl or higher, not hovering around $80/bbl as they have recently.

“The energy sector has been a very strong contributor to the recovery of the S&P 500, and the energy sector has been highly correlated to the flat price of crude oil, which itself has been highly correlated to the net West Texas Intermediate positions held by large speculators,” Jakob said. “The correlation between the net positions held by large speculators in WTI futures and WTI prices is much higher than in previous years; in 2008 there was a very strong rally in oil but with a non-existent correlation to the positions held by the large speculators. As large speculators drive the price of WTI, and as WTI drives the energy sector (equities), this makes the sustainability of the rally in the S&P somewhat dependent of the action of the large speculators in WTI. With the collapse of the financial sector, the S&P has become over-dependent on the oil sector for maintaining the value of the index, but the danger on this dependence is evident as at a certain level the higher oil prices start to work against the other sectors.”

The latest data showed jobless claims flat for the week but with a very small increase in the 4-week average. The durable goods orders for November were below expectations (down 1.3% vs. a consensus of minus 0.6%) while October was revised lower, from a negative 0.9% to a negative 3.1%. Personal spending at 0.4% was slightly below the consensus of 0.5%, but October was revised higher from 0.4% to 0.7%.

“That data point is healthy, unlike the new home sales that were a continued disaster,” Jakob said.

Energy prices
The February contract for benchmark US light, sweet crudes escalated by $1.03 to $91.51/bbl Dec. 23 on the New York Mercantile Exchange. The March contract climbed 95¢ to $92.16/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.73 to $92.21/bbl. Heating oil for January delivery increased 1.23¢ to $2.54/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month advanced 1.81¢ to $2.44/gal.

The January natural gas contract dropped 6.9¢ to $4.08/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 7.6¢ to $4.09/MMbtu.

In London, the February IPE contract for North Sea Brent crude gained 60¢ to $94.25/bbl, a sizeable premium over WTI’s price. Gas oil for January increased $3.50 to $784.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 57¢ to $90.73/bbl on Dec. 24. With less than a week left in 2010, OPEC’s basket price has averaged $77.20/bbl so far this year, up from an average $61.06/bbl in 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