MARKET WATCH: Oil prices rebound in New York; gas futures price drops again

Oil prices rebounded Feb. 3 after the US Department of Labor reported unemployment has fallen to 8.3%—the lowest level since February 2009. But natural gas gave back a sizeable portion of the previous session’s gain in the New York market.

However, the price of crude and the Standard & Poor’s 500 index were down while gas increased in early trading Feb. 6 after negotiations on austerity reform in Greece again were suspended over the weekend. That continues the danger that Greece may not receive its next bailout payment from other European Union members and will be forced to default on its sovereign debt by mid-March.

“If negotiations are this tough for Greece, just imagine the fiasco if an economy of Italy's size were the point of contingency,” said analysts in the Houston office of Raymond James & Associates Inc.

The price spread between West Texas Intermediate and the higher-priced North Sea Brent continued to widen last week “as the Brent market attracts more bullish bets than the WTI market,” reported James Zhang at Standard New York Securities Inc., the Standard Bank Group. There was a net loss of $1.72/bbl for the front-month WTI futures contract last week, compared with a net gain of $3.12/bbl for front-month Brent.

“The weakness in WTI was reflected in the technical pattern of its price actions and a bearish US inventory report. A delay of the planned reversal of the Seaway Pipeline announced last week has also caused the weakness to transmit further down the WTI curve, with the WTI June-December spread falling over $3/bbl since the beginning of January. In contrast, Brent was supported by supply disruptions from Sudan and geopolitical concerns over Iran. However, as the strength in Brent held up, refining margins were further eroded,” Zhang said.

He said, “Oil products followed the crude market up but failed to catch up to Brent, resulting in slightly weaker product cracks and refining margins. Term structures of both WTI and Brent were firmer, lifted by moves in flat prices.”

The retreat of oil prices in early trading Dec. 6 apparently was “driven by profit-taking after the rally last week,” Zhang surmised. “German factory orders came in better than expected this morning, another data point suggesting that the Euro-zone economy is stabilizing.” This week the Bank of England is expected to produce more quantitative easing to stimulate that economy. “There is a small chance of the European Central Bank cutting the euro’s benchmark rate. Recent economic data and continuously supportive central bank policies give a risk-on bias to the oil market. In addition, the market is likely to add more risk premium to the oil price because of the situation over Iran and protests inside Russia,” said Zhang

Marc Ground at the Standard Bank Group said, “Given the back-tracking from the previous week’s moves, it would appear as though speculators remain unsure of the direction the oil market will take—as the threat of falling demand on the back of a weakening Euro-zone economy is countered by supply concerns owing to political tensions with Iran.”

‘Messy’ gas supply picture

The current shift of interest and operations to petroleum liquids and away from natural gas is like a painting by Claude Monet, a founder of French impressionist art, said Raymond James analysts: “Up close, it’s just a big mess for gas supply.”

They said, “Checking the pulse of each major basin, we find that US natural supply growth will likely be much more resilient than the market currently believes. Even though we are modeling a significant two-thirds reduction in dry gas-related drilling, overall US gas supply should continue to grow for the foreseeable future. Most interesting is the level of impact that associated gas production from oil and liquids plays will have on supply as operators flock to tap into nongas options.”

Raymond James analysts cautioned, “Expect the recent surge of activity in oil-liquids plays and the Marcellus [shale] to translate into supply growth that should more than offset declines from dry gas plays. We see significant forced gas-production curtailments in the summer of 2012.  At the very least, this should keep a lid on summer gas prices. At the worst, we could see a $1/Mcf handle on Henry Hub gas prices for the first time in decades. Thus, we are lowering our 2012 forecast from $3.25/Mcf to $2.50/Mcf and lowering our 2013 forecast from $4/Mcf to $3.25/Mcf. Long term, we are lowering our forecast from $4.50/Mcf to $4/Mcf.

They also noted Europe is scrambling to manage its gas supply and distribution in the face of extreme cold and disruption of Russian gas exports. “Russia's gas supply to some EU member states has suddenly dropped [as much as] 30% as a result of an increase in Russian gas demand,” the analysts said. “Due to the way Russia's gas contracts are designed, Russia can ship less gas if it is needed for domestic use; thus extreme cold weather in Russia has resulted in fewer shipments to EU members.”

Analysts said, “While the situation has not been elevated to an emergency, the European Commission did place its gas coordination committee on alert at the end of last week. France, which consumed a record high amount of gas last week, has seen its largest gas company draw down reserves to fill the gap from Russian supply. EU countries must hold a 1-month supply of gas as a cushion. Continued gas supply problems with Russia have spurred countries like Poland to encourage the development of natural gas resources by allowing producers to tap domestic shale plays.”

Energy prices

The March contract for benchmark US light, sweet crudes rebound $1.48 to $97.84/bbl, Feb. 3, wiping out the previous session’s loss on the New York Mercantile Exchange. The April contract regained $1.49 to $98.23/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.48 to $97.84/bbl.

Heating oil for March delivery continued to rise, up 6.15¢ to $3.11/gal on NYMEX. Reformulated stock for oxygenate blending for the same month climbed 4.55¢ $2.91/gal.

The March natural gas contract fell 5.5¢ to $2.50/MMbtu on NYMEX, hanging onto most of its gain from the previous session. On the US spot market, gas at Henry Hub, La., continued its advance, up 6.8¢ to $2.41/MMbtu.

In London, the March IPE contract for North Sea Brent escalated $2.51 to $114.58/bbl. Gas oil for February increased $11.75 to $959.50/tonne.

The Organization of Petroleum Exporting Countries in Vienna was closed Feb. 6, so no price update was posted.

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