MARKET WATCH: Energy prices continue to fluctuate; oil declines

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 20 -- Energy prices were mixed and continued to fluctuate Jan. 19 with some commodities regaining part of their losses from the previous session and some losing part of their gains in the New York market.

“With oil once again flowing freely through the Trans-Alaska Pipeline, crude dropped 0.6%,” said analysts in the Houston office of Raymond James & Associates Inc. However, natural gas rose 3.1% on forecasts for colder weather and expectations the government would report a larger-than-average withdrawal of gas from US storage.

“Concerns that the economic recovery might be slowing weighed on the broader market, as the Standard & Poor's 500 Index fell 1% and the Dow Jones Industrial Average closed slightly lower,” they said. “Energy stocks followed the broader market and crude into the red.”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “The US housing start number yesterday came in worse than expected, which the oil market largely brushed aside. However, the US weekly jobless claims number will be closely watched today after a sharp increase in number of claimants last week. The market has been trading sideways for over a week, and in a very narrow range following the jump on the back of Alaska pipeline outage. The market is looking heavy and may be due for a correction.”

With the price of West Texas Intermediate down Jan. 19 in New York and North Sea Brent’s value up, the spread between the two benchmark crudes widened to $6.35/bbl in Brent’s favor.

“With the very strong premium of Brent vs. WTI and the dollar stronger than in the first half of 2008, the average domestic gasoline price in Europe (including duties and tax) is now at the highest level since the spring of 2008 and only a few points off the all time highs of the summer of 2008,” reported Olivier Jakob at Petromatrix, Zug, Switzerland. “Unemployment in Europe is at 10.1%, and if everything is fine in Germany, the peripheries have to engage in austerity (more talks about Greece having to restructure the debt), and we will have to see how consumption deals with the higher driving fuel prices.”

Data starting to come out for December show a strong decline in consumption, “but a lot of that has probably been due to the bad weather (chaos on roads due to snow during December), making it difficult for now to distinguish between the snow and the price impact,” Jakob said.

US inventories
The Energy Information Administration reported Jan. 20 the withdrawal of 243 bcf of natural gas from US underground storage in the week ended Jan. 14, exceeding the Wall Street consensus of 230 bcf. That left 2.7 tcf of gas in storage, 74 bcf more than at this period last year and 51 bcf above the 5-year average.

In a separate report delayed 1 day because of the US holiday this week, EIA said commercial US crude inventories increased 2.6 million bbl to 335.7 million bbl last week. The Wall Street consensus was for a decline of 500,000 bbl. Gasoline stocks jumped by 4.4 million bbl to 227.7 million bbl, outstripping a consensus for a 2.5 million bbl build. Finished gasoline inventories decreased while blending components inventories increased. Distillate fuel inventories climbed by 1 million bbl to 165.8 million bbl, exactly as analysts had predicted.

The import of crude into the US increased by 140,000 b/d to 9 million b/d last week, EIA reported. In the 4 weeks through Jan. 14, US crude imports averaged 8.8 million b/d, which was 334,000 b/d more than in the comparable period a year ago. Gasoline imports averaged 722,000 b/d while distillate fuel imports averaged 241,000 b/d last week, EIA said.

The input of crude into US refineries was up 389,000 b/d to 14.3 million b/d last week with units operating at 83% of capacity. Gasoline production increased to 8.9 million b/d. Distillate fuel production decreased to 4.4 million b/d.

Energy prices
Crude prices continued to decline Jan. 19 on the New York Mercantile Exchange with the February contract for benchmark US light, sweet crudes down 52¢ to $90.86/bbl. The March contract dropped 50¢ to $91.81/bbl.

On the US spot market, WTI at Cushing, Okla., was down 52¢ to $90.86/bbl. Heating oil for February delivery increased 1.03¢ to $2.66/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month continued inching higher, up 0.24¢ to $2.48/gal.

The February natural gas contract rebounded, gaining 13.6¢ to $4.56/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., registered a small increase, 0.7¢ to $4.49 MMbtu.

In London, the March IPE contract for North Sea Brent crude turned around in the latest session, up 36¢ to $98.16/bbl. Gas oil for February continued climbing, up $3.25 to $821.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was up again, 19¢ to $93.99/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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