MARKET WATCH: Oil drops to 12-week low on NYMEX

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Feb. 15 -- US light, sweet crudes ended trading on the New York Mercantile Exchange at less than $85/bbl in New York on Feb. 14 while North Sea Brent crude prices in London rose, prompting analysts to comment on the disconnect.

“Dislocations and disruptions continue to be at the heart of the oil market,” Amrita Sen of Barclays Capital said in a Feb. 15 research note, noting an April Brent-West Texas Intermediate differential of more than $14.

“Indeed, the distortions in WTI are getting more profound, frequent, and of a greater scale,” Sen said. “The disequilibrium has continued to be blown out of proportion. Unlike in 2009 or 2010, when the seasonal draws in Cushing finally reversed the dislocation, there seems to be no end in sight currently.”

Separately, Raymond James & Associates analysts also said the spread between US light, sweet crudes and other types of crude “has blown out to unprecedented levels.” RJA issued its first Brent crude forecast of average realized prices of $97.50/bbl in 2011 and $104.50/bbl in 2012.

Elsewhere, China reported its trade surplus fell sharply in January.

The Asian giant said the surplus fell to $6.5 billion, less than half the $13.1 billion surplus reported for December 2010. Imports jumped 51% compared with January 2010. Exports rose 37.7% during the 12-month period.

Traders expressed concerns that civil unrest in the Middle East might be spreading. Protests have spread from Egypt to Iran, Bahrain, Algeria, and Libya, The Wall Street Journal reported. Analysts and traders said they are watching for potential disruptions to critical crude supply.

Energy prices
The March contract for benchmark US light, sweet crudes dropped 77¢ to $84.81/bbl Feb. 14 on NYMEX. The April contract decreased 40¢ to $88.73/bbl. On the US spot market, WTI at Cushing was down 77¢ to $84.81/bbl.

Heating oil for March delivery rose 5.46¢ to $2.75/gal on NYMEX. Weather forecasts call for the US to experience warmer-than-normal temperatures this week. Barclays Capital analysts said warmer weather will mean reduced heating demand, which will help heating oil supplies rebound after cold snaps across much of the US earlier this month.

“The warm temperature pattern is expected to hold in the Southeast and, to a lesser extent, in the Midwest and East,” through Feb. 28, Barclays Capital analyst James Crandell noted in a Feb. 15 research note.

Reformulated blend stock for oxygenate blending for the same month climbed 5.22¢, closing at a rounded $2.517/gal.

The March natural gas contract gained 1.5¢ to $3.925/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 7.5¢ to $3.895/MMbtu.

In London, the April IPE contract for North Sea Brent crude gained $2.14 to $103.08/bbl–the highest close since September 2008. Gas oil for March dropped $21.25 to $871.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was not immediately available because OPEC offices in Vienna were closed Feb. 15.

Contact Paula Dittrick at paulad@ogjonline.com.

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