MARKET WATCH: Crude oil prices rise; European crisis continues

Oil prices escalated Nov. 7 with crude closing above $95/bbl in the New York market as natural gas prices again declined and economic and political issues deteriorated in Europe.

“Oil rallied as Brent broke through significant technical resistances in the 200-day moving average and the upper band of a well-established channel,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Oil products failed to catch up to the strong rally in crude, resulting in weaker product cracks across the barrel and softer refining margins. Meanwhile, the term structures for both West Texas Intermediate and Brent followed flat prices and were firmer, on a persistently tight physical market.”

In Greece, negotiations between Prime Minister George Papandreou and opposition leader Antonis Samaras to share power in that country continued for a second day Nov. 8, amid indications that selection of a new prime minister is imminent. Papandreou and Samaras agreed over the weekend to forge an interim government to get the next phase of a €130 billion Euro-zone rescue fund through parliament.

In Italy, Premier Silvio Berlusconi won a vital vote in parliament but apparently lost his previous majority in the Chamber of Deputies. So far, he has refused pressure from key supporters and the opposition to resign in the face of the financial crisis in that country.

Zhang said the market generally had hoped Berlusconi would be voted out of power in favor of “a technocrat government” that would be “more likely to take control of the fiscal situation in Italy.”

Meanwhile, Zhang said, “Geopolitical risk has put the Middle East back on the radar as the International Atomic Energy Agency (IAEA) is due to release its report on Iran’s nuclear program. As the stake is so high, we do not expect any material change to the overall geopolitical situation in that region in the short term. Nevertheless, this increases the tail-risk of the market.”

German Chancellor Angela Merkel and French President Nicolas Sarkozy were unable to control the Greek crisis “and we should not kid ourselves…they will be able to control the Italian crisis,” said Olivier Jakob at Petromatrix in Zug, Switzerland. “The bond spreads continue to rise higher, Italy is now entering the phase of terminality that Greece and Portugal went into, and it is quite clear that the firewalls have failed. If the fire cannot be put out quickly on the Italian bond yields, then we have to prepare for the worse (also keeping in mind that it is probably not only [bankrupt brokerage firm] MF Global that made the wrong bets on European sovereign bonds). Yesterday, the European Financial Stability Facility issued a 10-year bond at 177 basis points over German bonds and that compares to 51 basis points for a similar deal in June.”

Jakob said, “As the Euro-zone goes deeper into austerity, we will have to keep a very negative view on economic and oil demand for Europe. The preliminary estimate of French petroleum sales (survey ex independent storage and refineries) for October has gasoline sales down 2%, diesel up 2% and heating oil (FOD) down 10% vs. last year.”

He reported, “Crude oil futures have been able to hold pretty well despite the pressure coming from the rising Italian yields, but the strength is in line with our expectations of a rising geopolitical premium as we head into the countdown to the IAEA report on Iran.”

A renewed geopolitical premium will help end the previous correlation between oil prices and Standard & Poor’s 500 Index or the euro-dollar valuations. However, Jakob said, “The Iranian premium will not be good for oil demand or the economy in general. The cracks on light ends will be under more pressure, but with Iran the market will be pricing war rather than what is needed to have steady economic growth. Under the current Iranian theme, we do not want to be at the same time long global equities and long oil futures. It will also be interesting to see what happens to consumer confidence if increased tensions do materialize between Iran and the West after the IAEA report.”

Zhang said, “In the short term, the oil price is likely to rally as the technical break-out in Brent will inevitably attract fresh buying and prompt short-covering. Furthermore, the very tight fundamentals keep the oil market supported. That said, headwind from a soft economy and an ongoing Euro-zone crisis is likely to cap oil prices below $120/bbl. Across the barrel, we favor middle-distillates despite the very strong rally during the past month, but we take a bearish view towards light and heavy products.”

Energy prices

The December and January contracts for benchmark US sweet, light crude on the New York Mercantile Exchange and WTI at Cushing, Okla., on the US spot market were all up $1.26/bbl Nov. 7 to $95.52/bbl, $95.45/bbl, and $95.52/bbl, respectively. The December contract on NYMEX traded as high as $96.11/bbl in that session.

Heating oil for December delivery increased 4.9¢ to $3.12/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month rose 6.48¢ to $2.73/gal.

The December natural gas contract dropped 8.7¢ to $3.70/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., continued its decline, down 5.3¢ to $3.36/MMbtu.

In London, the December IPE contract for North Sea Brent traded at $111.26-115.23/bbl in the Nov. 7 session before closing at $114.56/bbl, up $2.59 for the day. Gas oil for November continued its rally, up $15 to $984.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased to $111.08/bbl on Nov. 7 from $109.96/bbl at the end of last week. So far this year, OPEC’s basket price has averaged $107.24/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

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
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

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