MARKET WATCH: Equity, crude oil prices rebound

A rebound in the broader market help lift energy prices with the soon-to-expire front-month crude contract climbing 1.2% May 21 in the New York market. Natural gas dropped 4% in the same market, however, as traders cashed in their profits from a 20% rally over the past 2 weeks.

The broader market selloff subsided for the first time in seven trading sessions on reports the Group of 8 (G8) representing the economies of Canada, France, Germany, Italy, Japan, Russia, the UK, and the US wants to keep the Euro-zone intact. “Investors' global economic concerns were also tapered as China's Premier Wen Jiabao stated his country would use expansionary policies in order to stimulate growth,” said analysts in the Houston office of Raymond James & Associates Inc. Standard & Poor’s 500 Index recouped 1.6%. Energy stocks outperformed the broader market, with the Oil Service Index up 3.9% and SIG Oil Exploration & Production Index gaining 4%.

Olivier Jakob at Petromatrix in Zug, Switzerland, reported the value of the euro improved against the dollar for the second consecutive session, with the price of crude closely following the currency’s increased value. He said, “Volume yesterday was low, and that confirms further our impression that crude oil flat price was mostly trading the euro-dollar [valuation].”

Jakob said, “In relative values, the divergence between naphtha and gasoline continues. More Asian petrochemical crackers are cutting runs as naphtha is simply too expensive vs. LPG. That will continue to put pressure on the naphtha crack and spreads. On the other hand, the backwardation in reformulated stock for oxygenate blending (RBOB) futures is surging to recent peaks, and we need to keep in mind that there will be a long [Memorial Day holiday] weekend in front of the expiry next week.”

Meanwhile, he said, “US vehicles miles of travel for March are up 0.9% vs. a year ago, compared with February which had 1.8% year-over-year growth, and suggests that there could still be some upward revisions to US gasoline demand when the Department of Energy publishes its monthly revisions for March. For the first quarter, US vehicles miles of travel was 0.9% higher than last year. In March, the only region that had a negative growth in miles of travel was the West Coast; that is also where gasoline is the most expensive.”

Petroleum inventory data out of China are “not regular and not always consistent, but for what it is worth,” Jakob reported, official data indicate diesel stocks at the end of April are 15 million bbl higher than a year ago and had a small 500,000 bbl stock draw vs. March. Official data also show China was a small net exporter of diesel in April.

Energy prices

The June contract for benchmark US sweet, light crudes gained $1.09 to $92.57/bbl May 21 on the New York Mercantile Exchange. That contract expires at the close of trading May 22. The July contract rose $1.06 to $92.86/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.09 to $92.57/bbl.

Heating oil for June delivery increased 3.03¢ to $2.86/gal on NYMEX. RBOB for the same month advanced 5.06¢ to $2.94/gal.

The June natural gas contract dropped 13.3¢ to $2.61/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., however, was up 3.2¢ to $2.60/MMbtu.

In London, the July IPE contract for North Sea Brent climbed $1.67 to $108.81/bbl. Gas oil for June increased $3.75 to $911.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 77¢ to $105.93/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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