MARKET WATCH: US crude continues rally in mixed markets

Benchmark US light, sweet crude continued its moderate rally in New York while North Sea Brent dipped slightly in mixed markets Apr. 27.

“Positive US personal spending and consumer confidence data failed to offset more downbeat data earlier last week,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Gasoline showed signs of some recovery after heavy sell-off in the previous 2 weeks. Middle distillates [gave] back some of their gains with the market viewing the rally, post the bullish US inventory report, as being overdone.”

Analysts at KBC Energy Economics, a division of KBC Advanced Technologies PLC, said oil prices “continue to defy gravity” despite Iran “now looking less hawkish” and the Euro-Zone debt crisis again boiling over. As a result, they said, “The market has a shaky feel to it.”

On Apr. 30, Spain officially confirmed it is in its second recession in 3 years, with its economy down 0.3% in the first quarter of 2012. That marked two consecutive quarters of economic contraction, which constitutes a technical recession. Seven other countries in the 17-nation Euro-Zone— Belgium, Ireland, Italy, The Netherlands, Portugal, Greece, and Slovenia—were already in recession, as were three other European Union members outside the Euro-Zone, the UK, Denmark, and the Czech Republic. “Concerns about Spain and the overall European debt crisis are causing pressure this morning,” with oil and gas prices marginally lower in early trading, said analysts in the Houston office of Raymond James & Associates Inc.

Last week Standard & Poor’s Ratings Services cut Spain’s credit rating two notches from A to BBB+ with a negative outlook, indicating a risk of further downgrades (OGJ Online, Apr. 27, 2012). “This came hard on the heels of other worrying news, including gross domestic product figures for the UK that showed the country was once again in recession,” said KBC analysts. “Although the Dutch government, which collapsed last week over austerity measures demanded by the EU, now appears to have reached a compromise, it is still too early to say whether the fragile coalition politics will result in a robust agreement. Meanwhile, opinion polls continue to suggest that French President Nicholas Sarkozy will lose to Socialist front runner Francois Hollande, in the presidential poll on May 6. Hollande has said he does not back the agreement with Germany on austerity. If France were to pull out of the agreement, it would cause turmoil in Brussels, and could cause panic in already jittery financial markets.”

Energy prices

The June and July contracts for benchmark US light, sweet crudes increased 38¢ each to $104.93/bbl and $105.32/bbl, respectively, Apr. 27 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up 38¢ to $104.93/bbl, in step with the front-month futures contract.

Heating oil for May delivery declined 1.37¢ to $3.18/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, gained 2.29¢ to $3.14/gal.

The new front-month June contract for natural gas climbed 6¢ to $2.19/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 5.3¢ to $2.03/MMbtu.

In London, the June IPE contract for North Sea Brent lost 9¢ to $119.83/bbl. Gas oil for May fell $8.75 to $1,008.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 11¢ to $117.25/bbl. So far this year, the OPEC basket price has averaged $117.66/bbl. OPEC’s Vienna office will be closed May 1.

Contact Sam Fletcher at samf@ogjonline.com

 

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