MARKET WATCH: Natural gas fell 4.6% to a low for this year

Sam Fletcher
OGJ Senior Writer

HOUSTON, Feb. 8 -- The front-month natural gas price fell 4.6% to a year-to-date low Feb. 7 in the New York market on forecasts for mild weather. Oil prices slipped more than 1%, with North Sea Brent crude dropping below $100/bbl.

“Natural gas prices have fallen nearly 15% over the past 2 weeks and are within earshot of dropping beneath $4/Mcf,” said analysts in the Houston office of Raymond James & Associates Inc. They said oil and gas prices were still falling in early trading Feb. 8 and likely would continue.

Meanwhile, the Dow Jones Industrial Average and the Standard & Poor’s 500 index both hit new 2½-year highs “with merger and acquisition activity on the forefront of investors' minds,” they said. Energy corporate stock prices also climbed. It “sure looks right now” as though the market performance in January has “already poised the markets” for a successful year, Raymond James analysts said.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, reported, “Oil traded sideways initially yesterday, largely tracking the US dollar. However, the market ended much lower as it appeared to have triggered technical selling when it broke the 13-day moving average.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “As expected, the combination of the lower geopolitical perceived risk in Egypt and the start of the Goldman roll [the monthly rolling forward underlying futures contracts in the excess return index portfolio via the Goldman Sachs Commodity Index] in a wide West Texas Intermediate contango were fatal for the flat price of WTI yesterday.”

He said, “Given the wide contango in WTI, the Brent premium to WTI increased further and is testing again a premium of $12/bbl. This momentum trade on Brent vs. WTI began at the start of the year. However, the Brent time structure has started to shift in recent days from a flat structure to a contango structure.”

If the high level of crude inventories in Cushing, Okla., “fully justifies” a wide contango in WTI, Jakob said, “An extraordinary premium of Brent to WTI starts to be harder to justify when European cash differentials are on the weak side, when there are no confirmed supply disruptions (Egypt), and when Brent is returning close to a carry contango. It is the first time since April 2010 that Brent has been in a trend of a widening contango, and the front Brent contango is at levels not seen since June of last year. The return of Brent to a contango structure should not be ignored, as it is starting to level off the risk between having length in WTI and in Brent.”

He acknowledged, “WTI still has a much wider contango than Brent, but Brent carries the risk of an extraordinary premium to WTI and a volatility in the Brent-WTI spread that is outside of historical parameters.”

Meanwhile, Zhang noted, “Term structures for both WTI and Brent weakened, with the sell-off focused towards the front-end of the curves.” As the Egyptian situation eases, its “increasingly likely” WTI in the short term will “more likely win the tug of war with Brent” and drag Brent’s price lower, he predicted.

When geopolitical tensions in North Africa and the Middle East dominated the oil market last week, Zhang said, “The US government quietly announced a sale of 2 million bbl of heating oil from its strategic reserves, citing sulfur specification changes coming into effect next year. The timing of the announcement is interesting.”

Standard Bank Group analysts said last week member countries of the Organization for Economic Cooperation and Development should put their strategic petroleum reserves on standby in case supply disruptions trigger oil price spikes that could cripple the economic recovery. “Nevertheless, using the SPR to intervene in the oil market is always a very political decision and not one to be taken lightly,” Zhang said.

Energy prices
The March contract for benchmark US sweet, light crudes fell $1.55 to $87.48/bbl Feb. 7 on the New York Mercantile Exchange. The April contract dropped $1.21 to $90.64/bbl. On the US spot market, WTI at Cushing was down $1.55 to $87.48/bbl. Heating oil for March delivery declined 1.06¢ to $2.71/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month, however, increased 1.52¢ to $2.45/gal.

The March natural gas contract dropped 20.6¢ to $4.10/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 18.5¢ to $4.32/MMbtu.

In London, the March IPE contract for North Sea Brent crude traded at $98.77-100.90/bbl during the session before closing at $99.25/bbl, down 58¢ for the day. Gas oil for February increased $1.75 to $845/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes retreated 83¢ to $96.02/bbl.

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


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



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


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