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MARKET WATCH: Energy prices rebound as dollar weakens

Energy prices rebound Mar. 23 with most commodities reclaiming much of their losses from the previous trading session as the dollar fell against the euro.

“The oil market remains volatile,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “The term structure in Brent also weakened sharply, led by the sell-off in flat prices.”

He said, “Since the beginning of this month, the market has been trading in a range-bound pattern, struggling for direction. Implied volatility has declined substantially since the beginning of this year. We do not expect these relatively calm market conditions to last long as the oil market braces itself for interventions (e.g. a release of strategic oil reserves) or possibly even shocks. The oil market has failed to break out on the upside several times, which may signal the rally that started at the beginning of February is short-term and overly stretched.”

In other news, Federal Reserve Chairman Ben Bernanke said Mar. 26 the US job market remains weak despite 3 months of strong hiring and that the Federal Reserve's existing policies will help boost growth. In a speech to the National Association for Business Economics meeting in Arlington, Va., he said further job gains will likely require more robust consumer and business demand. He indicated the central bank is prepared to keep interest rates near zero until the economy improves substantially.

Meanwhile, the National Association of Realtors’ index of sales agreements declined 0.5% in February to a reading of 96.5 from January's 97 reading, which was the highest since April 2010. A reading of 100 or higher is considered healthy, but the index hasn’t climbed that high since April 2010.

Energy prices

The May contract for benchmark US light, sweet crudes regained $1.52 to $106.87/bbl Mar. 23 on the New York Mercantile Exchange. The June contract rebound by $1.51 to $107.35/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.52 and back in step with the front-month futures contract at $106.87/bbl.

Heating oil for April delivery increased 3.14¢ to $3.21/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 4.5¢ to $3.39/gal.

The April natural gas contract inched up 0.6¢ to $2.28/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5.7¢ to $2.08/MMbtu.

In London, the May IPE contract for North Sea Brent rose $1.99 to $125.13/bbl. Gas oil for April escalated by $15.25 to $1,029/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 98¢ to $122.77/bbl. So far this year, OPEC’s basket price has averaged $117.70/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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