MARKET WATCH: Oil market strengthens on favorable employment report

The oil market continued to strengthen Mar. 9 on a better-than-expected government report of new jobs. US natural gas prices made slight gains that day after falling to a decade low earlier in the week.

“The oil product market was mixed with reformulated stock for oxygenate blending (RBOB) gasoline outperforming Brent crude, while heating oil on the New York Mercantile Exchange fell as the end of heating season kept middle-distillates under pressure,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Physical crude price differentials fell further and continued to soften this morning, as poor refining economics and the spring maintenance season reduced demand.”

Panic buying “has probably slowed as well” with Iran and permanent members of the United Nations’ Security Council now more likely to reopen negotiations, Zhang said. “This shift in sentiment towards the physical oil market is reflected by the fact that the time spread among the first few months of the Brent curves has fallen to the lowest levels since mid-February,” he said.

In Houston, analysts at Raymond James & Associates Inc. said, “There is still some debate about the gas market—the timeline for a demand pickup, [LNG] exports, etc.—but no real dispute about an exceedingly ugly picture for the next 12-24 months.” They noted the LNG boom in the Asia-Pacific market “has only accelerated” since the failure of Japan’s Fukushima nuclear plant a year ago.

Raymond James analysts reported, “Over the weekend, concerns surrounding China's growth arose after trade balance data showed the country's deficit hit $31.5 billion in February, the largest monthly deficit in 12 years. This was primarily driven by a slowdown in exports.”

Zhang said, “Chinese crude oil imports hit a new daily average record in February, as the country added new refining capacity. However, the sum domestic production and crude imports outstripped refinery throughput by 670,000 b/d, which points to substantial stock building. This is likely to have been driven by the ongoing program of building strategic reserves. Furthermore, concerns over major supply disruption because of the Iranian sanctions are most likely to have accelerated the effort temporarily.”

Energy prices

The April contract for benchmark US light, sweet crudes gained 82¢ to $107.40/bbl Mar. 9 on NYMEX. The May contract rose 81¢ to $107.87/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 82¢ to $107.40/bbl.

Heating oil for April delivery lost 0.57¢ to $3.26/gal on NYMEX. RBOB for the same month increased 1.84¢ to $3.33/gal.

The April natural gas contract advanced 5.2¢ to $2.32/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.9¢ but closed essentially unchanged at a rounded $2.19/MMbtu.

In London, the April IPE contract for North Sea Brent increased 54¢ to $125.98/bbl. Gas oil for March was up $1 to $1,033.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 2¢ to $124.15/bbl. So far this year, the OPEC basket has averaged $115.79/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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