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

Market watchers' adjustments offer hints of recovery

01/26/2015 Because markets look ahead, changes in standard forecasts offer potentially important signals during storms such as the one now pummeling the oil a...

A message from Oil & Gas Journal

12/15/2014

An important transition occurred during production of this issue of Unconventional Oil & Gas Report.

MARKET WATCH: Crude oil prices down as US government shutdown lingers

10/16/2013 The front month crude oil contract on the New York market dropped to the lowest level on Oct. 15 since it last settled below $100/bbl on July 2.

MARKET WATCH: Crude oil traded higher amid Washington budget talks

10/15/2013 Crude oil futures prices traded higher on the New York market Oct. 14 as US lawmakers reported progress in ongoing efforts toward reaching an agree...

MARKET WATCH: Oil prices close down at end of volatile week

10/14/2013 The NYMEX November crude contract lost 99¢ on Oct. 11, settling at $102.02/bbl ending a week of volatile trading. The December contract fell 83¢ to...

MARKET WATCH: Oil prices continue falling as Syria risk apparently lessens

09/17/2013 Oil futures prices reached their lowest level in 3 weeks with the Sept. 16 closing while the US and Russia agreed to terms under which Syria is exp...

MARKET WATCH: Oil prices rebound slightly awaiting US decision on Syria

09/04/2013 Oil prices climbed on New York and London markets Sept. 3 in response to comments indicating key US lawmakers will support US President Barack Obam...

MARKET WATCH: Syria crisis puts pressure on some oil markets

08/27/2013 Crude oil prices in world markets edged upwards Aug. 26 on reports that “tolerance of the West for what’s taking place in Syria appears to be comin...

MARKET WATCH: Oil futures rise Aug. 23 on Lebanon violence

08/26/2013 Oil futures prices rose on the New York market Aug. 23, and traders attributed the increase to escalating violence in the Middle East that added to...
White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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