Oil price strengthened in 2010

Sam Fletcher
OGJ Senior Writer

Front-month crude prices waffled in late December, dropping below $90/bbl Dec. 30 before rebounding to $91.38/bbl Dec. 31 in the last trading session of 2010 in New York. On Dec. 23, the last trading day before Christmas, the February contract for US crudes escalated to $91.51/bbl on the New York Mercantile Exchange, its first time to top $90/bbl since October 2008.

“Crude ended 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 last 2 weeks of the year, and the National Weather Service forecast below-average temperatures for the center of the country on Jan. 8-12. Low temperatures and heavy snowfall also hit Europe in the closing days of 2010.

Olivier Jakob at Petromatrix, Zug, Switzerland, said Jan. 3, “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.”

As investors turned from the stock market to the bond market, the US Federal Reserve bought $240 billion of Treasuries from primary dealers, sometimes the same day dealers received them.

2011 outlook
Raymond James analysts reported Jan. 3, “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.” Although usually overly conservative, Raymond James’ oil price forecast of an average $80/bbl for 2010 “came in just a hair above the full-year average of $77/bbl,” they said, with price moves range-bound at $70-85/bbl for most of the year as market fundamentals took a backseat to a cautious economic recovery and global currency concerns.

They expect the 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 2011 oil forecast is $90/bbl, rising to $100/bbl (or higher) in 2012,” they said.

Raymond James analysts reported, “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.”

So, they said, “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.”

(Online Jan. 3, 2011; author’s e-mail: samf@ogjonline.com)

Related Articles

Energy consumption to escalate

07/30/2013 World energy consumption will jump 56% in the next 30 years, driven by growing demand in developing countries, the US Energy Information Administra...

US, Mexico energy trade in flux

05/28/2013 Energy trade between the US and Mexico is in flux with rising crude production in the US, falling production in Mexico, and rising Mexican demand f...

Foreign crude supply concentrated

04/29/2013 It’s no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest It’s levels since 1997—down 1.3 mil...

Corn, ethanol prices squeeze profit

03/25/2013 Last summer, US prices for ethanol and corn reached such an imbalance that production costs exceeded revenue at relatively simple ethanol plants, t...

Working on the railroads

02/26/2013 The rapid increase of North American crude production has resulted in pipeline bottlenecks in some areas, forcing more reliance on rail transportat...

War, weather issues affect energy

01/28/2013 The fatal 4-day siege at the In Amenas gas production plant in eastern Algeria near the Libyan border that left 81 people dead “heightens concerns ...

2013 looks a lot like 2012

12/31/2012 New Year 2013 looks as though it will be much like the old one. There’s rioting in Egypt, confrontation with Iran, continued crisis in the Euro-zon...

Political crisis weighs on oil

11/26/2012 On Nov. 21, Egyptian officials announced a ceasefire agreement—which they helped broker—between Israel and Hamas leaders to end a week of fighting.

Storms, oil, and elections

10/29/2012 Hurricane Sandy was bearing down on the East Coast on Oct. 29, disrupting oil supplies, energy demand, and early voting in the last full week befor...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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