MARKET WATCH: Crude oil, natural gas rebound among mixed market indicators

Crude oil prices rose in a late rally, recouping earlier intraday losses Feb. 29 in the New York market, after Federal Reserve Chairman Ben Bernanke warned of a slow national recovery and made no mention of a possible third round of quantitative easing to stimulate the economy.

But Bernanke’s message disappointed equity markets, with the Standard & Poor’s 500 Index finishing marginally lower, ending a 4-day rally. Natural gas climbed 3.7%, however, ending its 4-day downturn on new predictions for colder weather.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, reported, “Oil products, however, weakened on the day despite product draws reported in the US Department of Energy’s weekly oil inventory report—another sign of demand being crippled by high prices. Refining margins were further eroded and, if it were to persist at the current levels or move lower, we should expect refining run cuts in Europe. In turn, this would cool the heated crude oil prices and the time spread of Brent.”

He said, “The rather volatile market moves near market close during the past two trading sessions coincided with month-end as market participants squared their positions. We should expect more money flow driven by intraday market volatility for at least the first week of the new month, given the very high speculative length in the oil market and the scheduled monthly rolling programs for index funds. This will also continue to drive the extremely volatile West Texas Intermediate-Brent spread market.”

Although inventory data suggested a relatively more-bullish picture in oil products than crude, it failed to push products ahead of crude, “as the underlying product demand numbers from the reports remained very weak, in particular, gasoline demand,” Zhang said. “According to another DOE report, the US has become a net product exporter in 2011 for the first time in many decades, pointing to a structural shift in US oil demand after the 2008-09 recession and stubbornly high oil prices.”

Zhang said, “Looking through the angle of fundamentals in the physical oil market, we see the market increasingly dominated by poor refining economics and a soft oil product market. The oil market will have to rely on more bullish news around geopolitics and macroeconomic data to move another leg up. High oil prices have already pushed the Euro-Zone’s inflation higher than expected, while the Federal Reserve chairman also expressed concerns that the high gasoline price would put upward pressure on US inflation. While we are not trying to downplay the geopolitical risks that threaten global oil supply or exaggerate demand destruction, we do not see going long or short oil futures at the current levels as preferred trading strategies. Instead, we favor strategies such as put spreads or call spreads to express one’s directional view of the market. Meanwhile, we continue to see the current market as a good producer hedging opportunity, on high swap prices and low volatility.”

Moreover, he said, “A price spike on the back of any military action against Iran is likely to be short-lived as it is almost certain that it will be accompanied by a reserve release, and followed by more economic woes globally.

Research analysts at Barclays Capital reported, “Oil has very little spare production capacity globally—well below 2%—and demand, even in a weak global economy, still outstrips supply, based on our analysis. We also believe Asian oil demand is growing at a faster pace than markets are currently pricing in. Our Brent price forecast for 2012 is $115/bbl, rising to $135/bbl in 2015, with the balance of risk to the upside.”

Barclays Capital analysts also reported global LNG trade expanded in 2011, led by strong Asian demand in the aftermath of the Tohoku earthquake. “Liquefaction capacity additions will slow sharply in 2012-13, with regasification capacity outpacing supply additions by a factor of 4:1. This will provide a significant number of new potential destinations for cargoes and we expect LNG prices to remain strong,” they said.

US inventories

The Energy Information Administration reported the withdrawal of 82 bcf of natural gas from US underground storage in the week ended Feb. 14, below the consensus for a 90 bcf withdrawal. That left 2.5 tcf of working gas in storage, up 756 bcf from last year and 780 bcf above the 5-year average

EIA earlier reported commercial US inventories of crude increased 4.2 million bbl to 344.9 million bbl last week, exceeding Wall Street’s consensus for a 1.1 million bbl build. Gasoline stocks were down 1.6 million bbl to 229.9 million bbl, exceeding analysts’ expectations of a 400,000 bbl draw. Distillate fuel inventories dropped 2.1 million bbl to 141.4 million bbl, more than the expected 800,000 bbl decline.

Energy prices

The April and March contracts for benchmark US sweet, light crudes each gained 52¢ to close at $107.07/bbl and 107.52/bbl, respectively, Feb. 29 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing, Okla., was up 77¢ and back in step with the front-month futures price of $107.07/bbl.

Heating oil for March delivery declined 3.58¢ to $3.19/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.22¢ but closed essentially unchanged at a rounded $3.04/gal.

The April natural gas contract gained 9.7¢ to $2.62/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.4¢, closing virtually unchanged at a rounded $2.43/MMbtu.

In London, the April IPE contract for North Sea Brent rose $1.11 to $122.66/bbl. Gas oil for March dropped $19.50 to $1,002.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased $1.47 to $122.26/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

InterOil wins arbitration over rights dispute with Oil Search

02/11/2015 The International Chamber of Commerce arbitration panel in London has found in favor of InterOil Corp. in its battle with Oil Search Ltd. over pree...

PACE survey finds 69% support for crude exports to trading partners

02/11/2015 More than two thirds of registered voters responding in a nationwide telephone survey commissioned by Producers for American Crude Exports (PACE) s...

New study finds wide variations in gathering systems’ methane samples

02/11/2015 Samples of methane emissions from 114 natural gas gathering stations and 16 processing plants across 13 states found wide variations in amounts act...

EIA: US gasoline prices to average $1/gal less in 2015 vs. 2014

02/10/2015 US regular gasoline retail prices are expected to average $2.33/gal in 2015, down from $3.36/gal in 2014, according to the Energy Information Admin...

MARKET WATCH: NYMEX oil prices rise on revised OPEC forecast

02/10/2015 Crude oil prices climbed more than $1/bbl on Feb. 9 to settle above $52/bbl, marking a third consecutive trading session that ended with higher pri...

MEO, Eni to exchange sections of Timor Sea permit

02/10/2015 MEO Australia Ltd., Melbourne, and Eni SPA—MEO’s joint-venture partner in the NT/P68 permit in the Timor Sea—have decided to split the permit betwe...

MRPL increases ownership in aromatics complex

02/10/2015 Mangalore Refinery & Petrochemicals Ltd. (MRPL), a subsidiary of Oil & Natural Gas Corp. Ltd. (ONGC), has increased its ownership interest ...

White Papers

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

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

Available Webcasts



Global LNG: Adjusting to New Realties

When Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

When Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST



On Demand

The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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