MARKET WATCH: Warm weather reduces natural gas prices
Energy prices fluctuated within a narrow range with crude oil making minimal gains Mar. 5 in the New York market while natural gas fell 5% on forecasts of warmer than normal weather for March.
The broader market declined for a second consecutive session, down almost 1%, said analysts in the Houston office of Raymond James & Associates Inc. “Positive economic data from the US services sector failed to give the market any momentum,” they said.
James Zhang at Standard New York Securities Inc., the Standard Bank Group, reported, “The broad market for risky assets appeared to be subdued following a downward revision of the country’s growth target by the Chinese government. Although the US president increased the rhetoric over Iran ahead of the Israeli prime minister’s visit to Washington, most observers see military action against Iran ahead of the US presidential election as very unlikely. Oil products were also soft, with their time spreads at the front-end of the forward curves turning into contango. Technically, the oil market came under more pressure as most stochastic measures have turned negative.”
China announced it is targeting 7.5% growth in its 2012 gross domestic product, the lowest level since 2004. “While the oil market largely ignored the news for now, we do expect a slowing Chinese economy to have a negative impact on the oil market as well, although to a lesser extent than metals,” said Zhang. “It is important to note that China accounts for roughly half of the global demand growth for oil (400,000 b/d out of total 800,000 b/d growth, according to the latest International Energy Agency oil report, while demand from Organization for Economic Cooperation and Development countries continued to decline against a recovering economy. Distillates is likely to be hit more than gasoline as the government continues to tame the housing market and slows down infrastructure investment.”
In other news, a portion of Enbridge Inc.'s 318,000 b/d Lakehead System was shut in over the weekend following a two-vehicle collision that ruptured a small above-ground section of the oil pipeline in an industrial park in New Lenox, Ill. It is the largest crude oil pipeline to the US from Canada. The interruption of that crude supply “puts near-term downward pressure on Canadian and Bakken pricing as barrels are more or less stranded,” said Raymond James analysts. The pipeline is not expected to be back in service until Mar. 8.
Energy prices
The April contract for benchmark US sweet, light crudes inched up 2¢ to $106.72/bbl Mar. 5 on the New York Mercantile Exchange. The May contract increased 1¢ to $107.18/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 2¢ to $106.72/bbl in conjunction with the front-month futures contract.
Heating oil for April delivery gained 1.56¢ to $3.22/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, dipped 1.41¢ to $3.26/gal.
The April natural gas contract fell 12.9¢ to $2.36/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 7.2¢ to $2.31/MMbtu.
In London, the April IPE contract for North Sea Brent rose 15¢ to $123.80/bbl. Gas oil for March advanced $4.25 to $1,014.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped 74¢ to $122.34/bbl.
Contact Sam Fletcher at [email protected].
Sam Fletcher | Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.
