Both crude oil and natural gas prices increased Nov. 29, with the front-month oil contract closing on a 1.6% gain after temporarily topping $100/bbl in intraday trading in the New York market.
“Investors didn't wait to see how a proposed European Union-wide ban on Iranian oil would unfold,” said analysts in the Houston office of Raymond James & Associates Inc. Purchasers of corporate stocks of exploration and production companies “took the torch and ran with it, boosted by higher oil and gas prices,” they said. The SIG Oil E&P Index was up 2.1%, while service stocks shadowed the broader market with the Oil Service Index “flattish.”
The equity market “rallied out of the gate on bullish consumer confidence data before trotting to the finish line, ending the day up marginally as investors continue to scratch their heads over Europe's debt crisis,” said Raymond James analysts. “Could the EU Summit on Dec. 8 be the final reckoning? We won't hold our breath.” China announced a cut in bank reserve requirements, which also boosted early trading.
In other news, a violent mob stormed the British embassy in Tehran on Nov. 29, destroying property and threatening the safety of diplomats. Iranian police reportedly watched the attack but did nothing to prevent or stop it.
“This attack—which has been universally condemned, even by Iran's patrons in Russia—comes 1 week after Britain joined Canada and the US in increasing economic sanctions against Iran,” Raymond James analysts reported. “The actions of the Iranian regime have long ceased to shock us, so we do not claim to be especially surprised by this latest outrage. We would simply point out…that the regime's brutish, self-isolating behavior, in the context of its nuclear program keeps it firmly on the path that may well lead to a major military confrontation in the not-too-distant future.”
Olivier Jakob at Petromatrix in Zug, Switzerland, said, “The EU is still in discussion over a possible ban on Iranian crude oil imports, and Iran is showing what its reaction will be to such a ban: it will fully turn its back on the West.” On the other hand, if the EU fails to take action, it will be seen by Iran “as sign of weakness,” especially after the embassy attack.” Meanwhile, Jakob said, “The UK will have to engage in some sort of tit-for-tat after the storming of its embassy.”
He predicted, however, “The flat price of crude oil will continue to balance the negative global macro view and the growing geopolitical risk out of Iran.”
Elsewhere, Raymond James analysts reported, “Parliamentary voting in Egypt has gone smoothly for the second day in a row with voter turnout being much higher than expected and serious violence nowhere to be found. This is in contrast to the week leading up to the elections, when clashes between protesters and the in-power military claimed 43 lives. Although this is just the first stage of elections (three total stages with final results expected by Jan. 13), early indications have been optimistic, as most Egyptians seek to depose the military and stabilize a struggling Egyptian economy over the next 6-12 months.” The second stage of voting begins Dec. 14 followed by a run-off election Dec. 21. The final stage begins Jan. 3 with a run-off on Jan. 10.
Peaceful and successful voting “bodes well” for Houston-based Apache Corp., “which has roughly 20% of its reserves and production in Egypt,” Raymond James analysts said.
The Energy Information Administration said Nov. 30 commercial US crude inventories expanded by 3.9 million bbl to 334.7 million bbl in the week ended Nov. 25, far above Wall Street’s consensus for an increase of 100,000 bbl. Gasoline stocks were up 200,000 bbl to 209.8 million bbl, compared with market expectations of a 1.5 million bbl gain. Finished gasoline inventories decreased while blending components increased last week. Distillate fuel inventories jumped by 5.5 million bbl to 138.5 million bbl last week, counter to predictions of a 1.3 million bbl draw.
The American Petroleum Institute earlier reported US crude stocks were up 3.4 million bbl to 339.2 million bbl, with gasoline inventories down 173,000 bbl to 209.4 million bbl and distillates up 1.3 million bbl to 139.5 million bbl last week.
EIA said imports of crude into the US increased 742,000 b/d to 9.1 million b/d last week. In the 4 weeks through Nov. 25, crude imports averaged 8.6 million b/d, up 285,000 b/d from the comparable period a year ago. Gasoline imports last week averaged 619,000 b/d while distillate fuel imports averaged 150,000 b/d.
However, the input of crude into US refineries declined 25,231 b/d to 14.6 million b/d with units operating at 84.6% of capacity last week. Gasoline production decreased to 9.2 million b/d as distillate fuel production increased to 4.8 million b/d, said EIA.
The January contract for benchmark US light, sweet crudes continued its rally, up $1.58 to $99.79/bbl Nov. 29 after climbing as high as $100.15/bbl in intraday trading on the New York Mercantile Exchange. The February contract gained $1.55 to $99.88/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.58 to $99.79/bbl.
Heating oil for December delivery advanced 5.12¢ to $3.02/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 2.1¢ to $2.54/gal.
The new front-month January natural gas contract regained 10.8¢ to $3.63/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., continued to escalate, up 25.8¢ to $3.38/MMbtu.
In London, the January IPE contract for North Sea Brent climbed $1.82 to $110.82/bbl. Gas oil for December continued its rebound, up $12 to $962/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 99¢ to $109.74/bbl.
Contact Sam Fletcher at email@example.com.