MARKET WATCH: Oil prices rebound, gas prices fell prior to Easter weekend

Crude oil recouped some of its earlier loss Apr. 5 ahead of Good Friday and the Easter weekend, but natural gas prices continued to fall in the New York market.

Commodity and equity prices were down in early trading Apr. 9 after the government reported Apr. 6 the addition of only 120,000 US jobs during March. It was the first time since November that the number of new jobs fell below 200,000 and broke what the Associated Press described as “the strongest stretch of job growth since the Great Recession.” Markets were closed Apr. 6 in observance of Good Friday.

The lower-than-expected number of new jobs “prompted investors to rush to the safety of the bond market, which was open for part of the day” on Apr. 6, said analysts in the Houston office of Raymond James & Associates Inc. “The weak jobs report has many believing that QE3 [a third round of “quantitative easing” by the Federal Reserve System to stimulate the US economy] could be coming down the pipe ahead of what is traditionally the worst performing 6-month stretch for the stock market (May through October). Overseas, a disappointing treasury auction out of Spain last week pushed yields even higher, signaling that Euro-zone concerns are still alive and well,” they said.

While growing US oil supply is clearly driving the US toward energy independence, falling US oil demand is providing a tailwind,” Raymond James analysts reported. “As economies become more developed, oil intensity peaks and begins to decline. In China, where oil intensity has begun to fall in recent years, absolute gross domestic product growth rates remain high enough for oil demand to still move up. In the US and other industrialized countries, however, it is now very difficult to achieve the level of GDP growth that's needed for oil demand to increase.”

Raymond James listed four key factors why US oil demand is down roughly 5% so far this year: rising fuel economy, changing driving habits, more natural gas-powered vehicles, and a shift to more natural gas in petrochemicals. “All of these are secular themes; in other words, they are likely to persist for the next several years,” the analysts said. “The US continues to use more oil per capita than any other major economy, but the historical trend would suggest that oil intensity among various countries tends to converge over time.”

Energy prices

The May contract for benchmark US light, sweet crudes recouped $1.84 to $103.31/bbl Apr. 5 on the New York Mercantile Exchange. The June contract increased $1.80 to $103.83/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.84 to $103.31/bbl.

Heating oil for May delivery rebound by 0.83¢ to $3.17/gal on NYMEX. Reformulated stock for oxygenate blending for the same month regained 0.69¢ to $3.34/gal.

The May natural gas contract continued to drop, however, down 5.2¢ to $2.09/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 7.9¢ to $1.98/MMbtu, wiping out its gain from the previous session.

In London, the May IPE contract for North Sea Brent recovered $1.09 to $123.43/bbl. Gas oil for April continued to fall, down $5.75 to $1,007/tonne.

The Organization of Petroleum Exporting Countries’ office in Vienna was closed Apr. 6 and Apr. 9, so no price updates for its basket of 12 benchmark crudes were available.

Contact Sam Fletcher at samf@ogjonline.com.

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