MARKET WATCH: Crude and products slip; gas rises to 6-week high

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 28 -- Crude and petroleum product prices continued to slip lower Mar. 25 while natural gas rose to a 6-week high in the New York market on forecasts for colder than normal weather through next week in the northern US.

Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, reported the front-month US crude contract was marginally lower than last week’s closing price in early trading Mar. 28, despite persistent tensions in the Middle East and North Africa (MENA) region. “However, Brent weakened on very poor European refining margins data,” he said. West Texas Intermediate had a net gain of $3.50/bbl last week while front-month Brent ended the week almost unchanged.

Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, said, “The crimping of excess capacity due to lower Libyan production continues to provide support to prices. We believe that increasing unrest in Syria and Yemen, although not major oil-producing counties, will continue to keep the cauldron boiling in the Middle East and the longs [investors] interested.

De Wet said, “It’s reported that thousands were protesting on the street of Syrian city of Derra late last week, while Yemeni’s president is reported to be negotiating a deal for his resignation. In the meantime, the diplomatic spat between Bahrain and Iran appeared to be escalating, as Bahrain’s foreign minister warned that the disputes between the countries could lead to conflicts. As to Libya, the North Atlantic Treaty Organization agreed to take over command of the no-fly zone over Libya, which, however, has not changed the fact that no clear end-game has been spelled out. Overall, the situation in this region remains in flux.”

In Houston, analysts at Raymond James & Associates Inc. said Libyan rebels fighting Moammar Gadhafi’s regime “had the ultimate big brother backing them for the past week”—members of NATO. “Helped by what amounts to close air support from coalition airstrikes, over the weekend the rebels seized the hotly contested town of Adjabiya and went on to recapture the oil towns of Brega and Ras Lanuf. This is where the original rebel offensive fizzled 2 weeks ago, before the start of coalition airstrikes,” they said.

“The question now is whether the rebels will be emboldened to push on towards the much larger city of Sirte, Gadhafi's birthplace in central Libya. And if they do, will the coalition continue to back their advance with airstrikes? If not, the current bloody stalemate could continue almost indefinitely, with direct implications for Libyan oil production,” Raymond James analysts said.

Olivier Jakob at Petromatrix, Zug, Switzerland, said in the past week, like the previous week, energy was the leading sector in Standard & Poor’s 500, gaining 4.2% while the financials were gaining only 0.5%. “On a year-to-date basis the energy sector is clearly the leader of the pack, with gains of 15.4%, more than three times the returns of the broad S&P index,” he said.

Energy prices
The May contract for benchmark US light, sweet crudes dropped 20¢ to $105.40/bbl Mar. 25 on the New York Mercantile Exchange. The June contract decreased 17¢ to $105.94/bbl. On the US spot market, WTI at Cushing, Okla., was down 20¢ to $105.40/bbl in lock-step with the front-month crude contract.

Heating oil for April delivery slipped 0.72¢ to $3.05/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month dipped by 0.03¢ but closed essentially unchanged at a rounded $3.04/gal.

The April natural gas contract escalated 15.9¢ to $4.40/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 11.7¢ to $4.16/MMbtu.

In London, the May IPE contract for North Sea Brent crude declined 13¢ to $115.59/bbl. Gas oil for April dropped $2 to $979.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 10¢ to $110.91/bbl. With the first quarter of 2011 almost finished, the OPEC basket price so far has averaged $100.66/bbl, up from an average $77.45/bbl for all of 2010.

Contact Sam Fletcher at samf@ogjonline.com.

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