MARKET WATCH: Energy prices fall as Bernanke tables QE3

Sam Fletcher
OGJ Senior Writer

HOUSTON, July 15 -- The broader market and commodities fell July 14 with crude down 2%, giving back most of its gains over the previous two sessions in the New York market, as Federal Reserve Chairman Ben Bernanke said he isn’t inclined to embark “soon” on a third economic stimulus.

Energy commodity prices had climbed July 13 when Bernanke hinted a third round of quantitative easing (QE3) might be in the works.

“Oil fell sharply, particularly in West Texas Intermediate, as hopes of further quantitative easing in the US were dented and as fears rose over the sovereign debt crisis in the Eurozone and US,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “After raising hopes of QE3 the previous day, Bernanke’s second day of testimony to the US Congress was taken by market participants as being less supportive of such as move. This dented risky assets across the board and saw speculative selling of most commodities.”

Furthermore, Ground said, “The prospect of a possible downgrade in US debt ratings (after Standard & Poor's Financial Services LLC joined Moody's Investors Service in placing the US on review for downgrade) is adding to downward pressure on oil markets. To avoid these downgrades the US government must reach an agreement by the beginning of August on increasing the debt ceiling to prevent a possible default. These default and downgrade concerns overshadowed some slightly better-than-expected data flow on the US economy. Retail sales advanced 0.1% month-over-month in June, although the figure excluding auto sales remained unchanged. Initial jobless claims fell slightly to 405,000 after a revised increase of 427,000 in the previous week. Nevertheless, business inventories rose 1% month-over-month in May, which might be a sign of waning demand.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “If anybody in Washington, DC, was watching the price of oil the last 2 days, then the conclusion should be that the best policy to achieve lower oil prices is not to pump Strategic Petroleum Reserve crude out of the ground caverns but to ground ‘Helicopter Ben’ [Bernanke].” Jakob reiterated, “It will be very difficult for the Fed to launch another QE with gasoline prices near $4/gal.”

He predicted, “The focus for the weekend and for next week will be on the US debt ceiling but also on the European crisis management. WTI has not been able to break the resistance of $100/bbl, and many forecasters are now calling for crude oil to trade a range rather than trade a trend. Indeed, it is difficult to find enough inputs in the oil fundamentals to put a position on and believe that it could withstand a headline on the US or the South European debt. Volume in WTI was relatively high yesterday, but we expect to see a slower trading day today.”

There are “not a lot of new fundamentals to digest,” said Jakob. “The demand numbers for Italy show gasoline sales down 5.2% in June vs. the same month in 2010 while diesel sales were up 2.5% (May was down 3.4% for gasoline, up 3.7% for diesel).” He reported, “Rail traffic in the US for the week ending July 9 was down 3.2% vs. a year ago, which will be something to watch in coming weeks as it is starting to be a change of trend from the positive numbers seen so far this year.”

Ground said, “Market participants will be looking for any signs of a weakening US economy to confirm last week’s disappointing payrolls numbers. Should industrial activity and consumer confidence be shown to be waning, this could spell further downside for oil. Given the preoccupation with problems in the government bond market, better-than-expected data will most likely get little reaction.”

Energy prices
The August contract for benchmark US light, sweet crudes dropped $2.36 to $95.69/bbl July 14 on the New York Mercantile Exchange. The September contract lost $2.38 to $96.11/bbl. On the US spot market, WTI at Cushing, Okla., kept in step with the front-month futures contract, down $2.36 to $95.69/bbl.

Heating oil for August delivery declined 1.48¢ to $3.08/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month fell 2.68¢ to $3.12/gal.

The August natural gas contract decreased 2.5¢ to $4.38/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was down 4.6¢ to $4.39/MMbtu.

In London, the August IPE contract for North Sea Brent crude dipped 46¢ to $118.32/bbl. Gas oil for August fell $10.50 to $972.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes declined 51¢ to $112.74/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

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...

MARKET WATCH: Oil, natural gas close up in waffling markets

08/23/2013 The October contract for benchmark US light, sweet crudes on the New York Mercantile Exchange increased $1.18 to $105.03/bbl Aug. 22. The November ...

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