MARKET WATCH: Crude futures price ends 2010 up 15% for year

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 3 -- The front-month crude contract dropped below $90/bbl Dec. 30 in the New York market before rebounding the next day above $91/bbl in the last trading session of 2010.

“Crude ended the year on a strong note as prices surged forward 1.7% to end the year up 15%,” said analysts in the Houston office of Raymond James & Associates Inc. “Natural gas gained 1.5% as forecasts showed unusually cold winter weather spreading throughout the country.” Snowstorms disrupted holiday travel in the eastern US over the holiday week. The National Weather Service's forecast for Jan. 8-12 is for below-average temperatures to descend upon the center of the country.

On the other hand, they reported the broader equity market was essentially unchanged in light trading Dec. 31. “Energy stocks posted slight outperformance vs. the Standard & Poor’s 500 index as stocks rode the strength of commodity prices,” said Raymond James analysts. “Separately, the Organization of Petroleum Exporting Countries’ December output gained 0.5% to climb to a 4-month high as rising oil prices supported production.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “US equities were about unchanged in the holiday week. The S&P 500 was up 0.07% in the week and a strong 6.53% for the month for a total gain of 12.78% for the year. The NASDAQ was up 6.19% during December and closed the year 16.91% higher.”

The second phase of the US Federal Reserve Bank's quantitative easing program (QE2) “is managing a strong defense on the S&P 500, not allowing any setbacks.” As a result the historical volatility on the S&P 500 fell last week “to the lowest level since 1971,” Jakob said.

He noted, “As retail investors have been pulling their funds out of the stock market and moved more into the bond market, the US Federal Reserve has bought $240 billion of Treasuries from the primary dealers, at times buying Treasuries that primary dealers received on the same day they sold it to the Fed. The problem with markets dependent on subsidies is the difficulty to predict what will happen to the markets once the subsidies end. QE2 is scheduled to run until the end of the second quarter, but by the end of the first quarter the focus should already be on what will be the next steps taken by [Fed Chairman Ben] Bernanke to support the financial markets. The commodity markets will also be dependent on the US Federal Reserve, and Bernanke’s action signals should prevail over any fundamentals for the flat price of commodities in the first half of 2011. The US Federal Reserve will buy about $28 billion of Treasuries from primary dealers this week, starting with $7-9 billion today.”

In addition, Jakob said, “Volume on the New York Stock Exchange has been extremely low in 2010 and with financial institutions about to launch more trading platforms to cross-trade internally outside of the exchange, we expect the trend of low volume on the public exchange to continue as more volume is diverted to the outside pools. This will leave the public exchange more exposed to pricing distortions in periods of stress. The flash crash of May 2010 was a first warning. The lack of volume on the public exchange also makes it easier to implement a support program for the main index, and as a result 2010 has confirmed an extreme correlation between the price of oil, the pricing of the energy sector and the broad S&P 500 Index.”

He said, “During the holiday break the dollar was under strong pressure, with the yen and the Swiss franc being particularly strong. The Swiss franc is at a record high to the dollar and the yen is now also trending up to that status again. The strength of the Swiss franc remains a time-bomb for Hungary with most of its home mortgages issued in Swiss francs. Hungary has nationalized the assets of the private pension funds to reduce the budget deficit, but it is still at risk of further downgrade in ratings while it takes over the presidency of the European Union for the next 6 months.”

2011 outlook
Raymond James analysts noted, “For years now, we have been bearish on US natural gas prices and bullish on global oil prices. That was the right call, and we believe it will remain so in 2011. For the second year in a row, our oil forecast was unusually accurate (historically we have been overly conservative). Our 2010 oil forecast of $80/bbl came in just a hair above the full-year average of $77/bbl. Not that pinning 2010's price was all that difficult, as price movements were range-bound ($70-85/bbl) for most of the year as fundamentals played a secondary role. Instead, a cautious global macroeconomic recovery and global currency concerns drove investor sentiment and prices.”

They expect these same trends to continue in 2011. “Oil prices should move steadily higher assuming gradual economic improvement, with support coming from the combination of rising global oil demand and stagnant global oil supplies. Thus, our (admittedly conservative) 2011 oil forecast is $90/bbl, rising to $100/bbl (or higher) in 2012,” according to Raymond James.

Furthermore, they said, “Our bearish US natural gas bet in 2010 was not bearish enough. At the start of 2010, our $5/Mcf forecast was 15% below consensus, but still a full dollar above the 2009 price of $4/Mcf. Directionally, our bearish outlook proved correct, but we were not bearish enough since prices in 2010 actually averaged $4.40/Mcf.”

Therefore, Raymond James reported, “Our 2011 outlook is more bearish than either of the past 2 years. This is a result of continued gas supply growth due to improved production profiles and a stubbornly high gas rig count. We are going to need huge (and likely unattainable) increases in gas demand from the industrial and power generation industries in order to rebalance the gas market in 2011. As a result, we are once again slicing into our natural gas price forecasts and now expect 2011 to average $3.75/Mcf and 2012 to average $4.25/Mcf (with bias to the downside on both of these estimates). Finally, with a 2011 outlook for healthy oil prices, stagnant or depressed US gas prices, and rising rig counts, we believe that energy stocks are generally poised for additional gains in 2011. Overall, we are looking for energy indices to be up 5-20%, driven mainly by decent earnings growth.”

Energy prices
The February contract for benchmark US light, sweet crudes rebounded $1.54 to $91.38/bbl Dec. 31 on the New York Mercantile Exchange. The March contract gained $1.53 to $92.22/bbl. The expiring January heating oil contract increased 5.83¢ to $2.54/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month was up 6.14¢ to $2.45/gal. The February natural gas contract escalated by 6.7¢ to $4.41/MMbtu.

In London, the February IPE contract for North Sea Brent crude climbed by $1.66 to $94.75/bbl at a now long-standing premium to West Texas Intermediate crude. Gas oil for January lost $3.25 to $762.50/tonne.

The average price for OPEC’s basket of 12 reference crudes increased 48¢ to $89.47/bbl. Its basket price averaged $77.45/bbl in 2010, up from a 2009 average of $61.06/bbl.

Contact Sam Fletcher at

Related Articles

Magellan, PAA form Saddlehorn crude pipeline joint venture

02/27/2015 Magellan Midstream Partners LP and Plains All American Pipeline LP have formed Saddlehorn Pipeline Co., a 50-50 limited liability joint venture, to...

Recent CSIS report outlines main US oil infrastructure challenges

02/27/2015 The US crude oil renaissance has created strong demand for expanded US transportation systems, resulting in five primarily challenges, a recent Cen...

PetroChina mulling sale of its stake in Arrow CSG


PetroChina is reportedly considering selling its half of Arrow Energy’s Queensland coal seam gas (CSG) resources.

Michie named Oil & Gas UK chief executive


Deirdre Michie has been named chief executive of Oil & Gas UK, replacing Malcolm Webb, who will retire May 31.

MARKET WATCH: NYMEX crude oil prices swing down again

02/27/2015 The contract for US light, sweet crude oil for April delivery plunged by more than $2.80/bbl on the New York market Feb. 26 as volatility sent crud...

Low crude prices pressure Latin American producers, CSIS forum told

02/26/2015 Depressed crude oil prices are putting new pressure on Latin American producing countries to improve terms if they expect to attract outside invest...

Petroleum detected in fish tested after Yellowstone River pipeline spill

02/26/2015 Detectable levels of petroleum were found in tests of fish pulled from the Yellowstone River downstream from a broken petroleum pipeline near Glend...

Suriname bid round draws lackluster response

02/26/2015 The dramatic fall in oil prices is being blamed for the lack of interest shown by international oil companies (IOCs) in the deepwater offshore Suri...

House panel launches probe of DOS’s Keystone XL application process

02/26/2015 The US House Oversight and Government Reform Committee began an investigation of the US Department of State’s environmental impact statement for th...
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?


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.


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.


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.


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