MARKET WATCH: Winter cold continues gas price rally

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 24 -- Natural gas continued a 5-week rally Jan. 21 in the New York market on one of the coldest days of the year in the Midwest and forecasts for below-average temperatures while crude decline on more speculation China will tighten its monetary policy to cool its fast rising economy.

Energy stocks ended the day mixed as the broader market rose slightly, said analysts in the Houston office of Raymond James & Associates Inc.

Natural gas prices gained 5.7% last week “to the highest level since Aug. 4, as [US] inventories declined by 243 bcf [in the week ended Jan. 14], the most this winter season thus far and 10 bcf above market expectations,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. “With the arrival of another cold wave, we expect the year-over-year surplus to get wiped out completely and turn into a deficit by the next week. Winter is now 53% complete and has been 7% colder than normal, creating almost 185 bcf of additional demand so far.”

Meanwhile, at the Centre for Global Energy Studies (CGES), London, analysts noted 6 months of “much stronger than expected demand growth” in the second half of 2010 has drawn crude inventories down. “Oil prices are rising in response to tighter market fundamentals and a perception that the Organization of Petroleum Exporting Countries will not use its spare capacity in a timely manner,” they said. “The OPEC basket price required by Saudi Arabia to balance its economy has risen from $74/bbl last year to $83/bbl in 2011.”

The average price for OPEC’s basket of 12 reference crudes dipped 5¢ to $92.90/bbl on Jan. 21. So far in the first month of 2011, OPEC’s weekly basket price has averaged $92.58/bbl, compared with an average price of $77.45/bbl for all of 2010. CGES analysts said, “OPEC is once again denying that rising prices reflect market fundamentals, as it did in early 2008, setting the scene for higher prices if it does not act.”

However, James Zhang at Standard New York Securities Inc., the Standard Bank Group, said Jan. 24, “It is reported earlier today that the Saudi Arabian oil minister signaled OPEC may increase supply to meet growing demand.” Zhang said, “We agree with OPEC’s assessment that the global oil market is currently well supplied. However, we do not agree with the conclusion that no action should be taken [by] OPEC as long as inventories are high. To support price stability…OPEC should reiterate its intention to increase production, even though there is no immediate need, rather than reiterate its justifications for inaction.”

WTI-Brent spread
The spread between front-month contracts of West Texas Intermediate and North Sea Brent crude finished Jan. 21 with the price of WTI down $8.49/bbl from Brent. “Product cracks generally strengthened, while the term structure for WTI and for gas oil [on the IntercontinentalExchange Inc. (ICE)] weakened slightly,” Zhang said. The front-month WTI contract was down by $2.43/bbl net during last week, “while front-month Brent weakened only $1.08/bbl, after it hit a new 28-month high on Jan. 14,” he said.

Olivier Jakob at Petromatrix, Zug, Switzerland, reiterated, “There is in our opinion nothing abnormal with WTI being at a discount to Brent (something that we have called to happen on a structural basis all of last year), but our opinion remains that the current Brent premium to WTI will have an impact on future physical flows that will work against the sustainability of the current futures premium.”

Jakob said, “We cannot associate the strength of Brent futures vs. WTI with Europe running out of crude oil, given that cash crude (including Forties) was offered at lower premiums to dated during the week; we also cannot associate it with enough weakness in WTI given that if there is a contango in WTI, there is not yet the super-contango that has given in the past a wide discount of WTI to Brent.”

Zhang said, “In the financial markets, it appeared that concerns over Chinese monetary policy were setting the tone last week, which sent the prices of many risky asset classes lower, including the oil price. However, the US continued to report generally better-than-expected macroeconomic data.”

Energy prices
The new front-month March contract for benchmark US light, sweet crudes dropped 48¢ to $89.11/bbl Jan. 21 on the New York Mercantile Exchange. The April contract lost 33¢ to $90.63/bbl. On the US spot market, WTI at Cushing, Okla., fell 75¢ to $88.11/bbl as that market tried to get back in pace with the new futures market price. Heating oil for February delivery increased 2.76¢ to $2.65¢/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 3.64¢ to $2.46/gal.

The February natural gas contract climbed 4.1¢ to $4.74/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 12¢ to $4.73/MMbtu.

In London, the March IPE contract for North Sea Brent crude rose $1.02 to $97.60/bbl. Gas oil for February increased $7.75 to $814/tonne.

Contact Sam Fletcher at

Related Articles

Aussie, Timor-Leste regulators terminate Timor Gap permit

07/17/2015 Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian com...

Nexen pipeline leaks 5,000 cu m of emulsion in Alberta

07/17/2015 Alberta Energy Regulator (AER) reported that a Nexen Energy ULC pipeline has leaked 5,000 cu m of emulsion—a mixture of bitumen, produced water, an...

MARKET WATCH: NYMEX crude oil prices drops below $51/bbl

07/17/2015 Light, sweet crude oil prices for August delivery dropped modestly to settle at just under $51/bbl on the New York July 16, but Brent crude oil Aug...

API: US petroleum demand rose in June, second quarter

07/16/2015 Total US petroleum deliveries, a measure of demand, increased 4.2% from June 2014 to average 19.6 million b/d last month. In the second quarter, de...

ConocoPhillips plans further capex reduction for deepwater exploration

07/16/2015 ConocoPhillips reported plans to further reduce its capital expenditures for deepwater exploration, with the “most significant reductions” coming f...

DOE official: LNG exports could be limited by silt-clogged waterways, ports

07/16/2015 Silt, which is increasingly filling US waterways and ports, potentially could limit US LNG exports if it is not dredged soon, a top US Department o...

Fitch notes increase in energy-default rate

07/16/2015 Recent actions of two exploration and production companies have pushed the trailing 12-month energy default rate among issuers of high-yield bonds ...

ENOC trims Turkmen plan in Dragon takeover

07/16/2015 Emirates National Oil Co. Ltd. (ENOC), Dubai, will lower target oil production from the Cheleken area offshore Turkmenistan after acquiring full co...

KMI to buy Shell’s stake in Elba LNG project for $630 million

07/16/2015 Kinder Morgan Inc., Houston, has reached a deal with Royal Dutch Shell PLC to purchase 100% of Shell’s equity interest in Elba Liquefaction Co. LLC...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

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
Available Webcasts

The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP,


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.


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