MARKET WATCH: Oil prices mixed; gas price continues to fall

Although oil prices continued to gain on May 25, front-month crude futures traded down 1% for the whole of last week amid concerns over the deteriorating economy, particularly in Europe.

“Natural gas futures lost 6.3% on the week after climbing more than 35% over the prior month,” said analysts in the Houston office of Raymond James & Associates Inc. “With the Greek election only 3 weeks away and Spain's bailout of Bankia SA, we expect investor focus to remain heavily centered on Europe.” Spain earlier this month nationalized Bankia, one of the banks most exposed to the collapse in the Spanish property market.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “The oil market appeared to be stabilizing [on May 25]…. Oil products followed crude and ended the day slightly higher. The backwardation at the front-end of the Brent curve remains rather steep although the back-end has weakened significantly over the past few weeks. Elsewhere of note, the front-end of the West Texas Intermediate curve has been stable with the Seaway Pipeline starting to ship oil from Cushing, Okla., to the US Gulf Coast. Meanwhile, the ICE gas oil June-July spread is in a counter-seasonal backwardation, while the contango in heating oil [in New York] has steepened noticeably since the beginning of May.”

However, crude prices fell in early trading May 29 in London and New York after ratings agency Egan Jones downgraded Spain's sovereign debt on expectations widespread unemployment and a contracting economy will hinder Spain’s ability to repay debt.

Meanwhile, the Conference Board private research group said its Consumer Confidence Index dropped to 64.9 in May from a revised 68.7 in April, the biggest reduction in 8 months. The report said US residents worry about slow hiring, declining home values, a weak stock market, and a worsening European economy that threatens to undermine US recovery.

Nevertheless, Raymond James analysts reported, “Despite continued concerns from Europe of a potential Greek exit as well as Spanish banking issues, the broader markets were able to break a 3-week losing streak with the Standard & Poor’s 500 index up 1.7% last week.” The Oil Service Index and the SIG Oil Exploration & Production Index outpaced the broader markets, gaining 3.9% and 1.9%, respectively.

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “The S&P 500 managed to stabilize during the week…but is down 5.73% for the month and up 4.79% for the year. The NASDAQ was up 2.11% during the week and is down 6.86% for month but up 8.92% for the year.” He said, “The S&P 500 is close to the levels of last year for the same week, but the sectors that were leading in 2011 are trailing in 2012. Up until a few weeks ago, the financial sector was the leading sector this year, but it has been coming off since JP Morgan [Chase & Co., the biggest US bank] showed that investment banks transformed themselves from ‘too big to fail’ to ‘too big to whale’” (OGJ Online, May 11, 2012).

Jakob reported, “Apart from the German DAX, the other European stock markets are in red, and yields were not improving for Italy, Spain, and Portugal while Germany was selling during the week some 2-year bonds with zero yields. Spanish bank Bankia on May 25 asked the state to be kind enough to help it to the tune of an additional €19 billion while the Spanish state of Catalonia is asking for help in order to refinance its debts.” On May 28, the 10-year bond yields for Spain rose to 6.5%.

“With the fear of Greece and some resurgence of the fear of Spain, the euro-dollar [valuation] has been under serious pressure during the week and broke the support of 1.262, and 1.25 was broken on an intraday basis May 25,” said Jakob. “This will start to make things more complicated for the US Federal Reserve that has been doing everything it can to have a weak dollar. The correlations between oil, equities, and the euro-dollar remain at very high level.”

Zhang said, “While the Euro-zone sovereign debt crisis is still rocking the market, in particular the possibility of a Greek exit, the oil market has shifted its focus towards Iran after a disappointing round of negotiation over the country’s nuclear ambitions. The latest news suggests that Iran is holding back any International Atomic Energy Agency inspection while pushing ahead on its uranium enrichment program. This suggests that progress in the next round of negotiations, set for June 18-19 in Moscow, is unlikely to be made.”

He reported price differentials for physical crude cargoes have been strengthening, pointing to a tighter market due to healthy refining margins and the end of the spring maintenance season for refiners. “The counter-seasonal strength in European middle distillates also gives cause for concerns in terms of the potential for further tightening in the physical market,” he said.

Energy prices

The July contract for benchmark US light, sweet crudes continued to rise, up 20¢ to $90.86/bbl May 25 on the New York Mercantile Exchange. The August contract gained 21¢ to $91.15/bbl. On the US spot market, WTI at Cushing was up 20¢ to $90.86/bbl.

Heating oil for June delivery inched up 0.69¢ to $2.83/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 1.64¢ to $2.89/gal.

The June natural gas contract fell 7.9¢ to $2.57/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 7.5¢ $2.58/MMbtu.

In London, the July IPE contract for North Sea Brent increased 28¢ to $106.83/bbl. Gas oil for June advanced $2.75 to $908.25/tonne.

The US market was closed May 28 for the Memorial Day holiday.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 42¢ to $105.01/bbl on May 28.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

EPA won’t finalize RFS’s 2014 biofuel quotas before yearend

11/21/2014 The US Environmental Protection Agency announced it will not finalize 2014 biofuel quotas under the federal Renewable Fuel Standard (RFS) before ye...

MARKET WATCH: NYMEX crude up on recovering Chinese oil demand

11/21/2014

Oil prices bounced back up $1/bbl on the New York market Nov. 20 on indications that Chinese oil demand might be recovering.

Worker killed in platform explosion offshore Louisiana

11/21/2014 An explosion that occurred on Nov. 20 at the Fieldwood Energy LLC-operated West Delta 105 E offshore platform, also known as Echo, in the Gulf of M...

Total joins global climate initiatives

11/20/2014 Total SA, in what it describes as a consolidation of its efforts to address climate change, will support initiatives of the United Nations Global C...

IHS: ‘Tight-oil test’ under way in US amid lower oil prices

11/20/2014 The vast majority of potential US tight-oil production growth remains economical in the current crude oil price environment, according to a recent ...

Apache to sell Louisiana, Anadarko assets for $1.4 billion

11/20/2014 Houston independent Apache Corp. has agreed to sell noncore southern Louisiana and certain Anadarko basin assets in two separate deals for a combin...

AFPM: Oregon’s proposed low-carbon fuel standard unconstitutional

11/20/2014 Oregon’s proposed low-carbon fuel standards (LCFS) program is unconstitutional, the American Fuel & Petrochemical Manufacturers said in comment...

MARKET WATCH: Crude oil futures prices rangebound

11/20/2014 US light, sweet crude oil prices remained below $75/bbl Nov. 19 on the New York market, while analysts and traders focused on the upcoming meeting ...

Bids spike in Northern Alaska lease sales

11/19/2014 Alaska’s Division of Oil & Gas received 356 bids on 298 tracts in its 2014 Northern Alaska area-wide lease sales, trumping the 92 bids received...

White Papers

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Increase Equipment Uptime Through Robust Enterprise Asset Management

Whether you operate in the Upstream Drilling and Exploration sector, the Midstream distribution sector...
Sponsored by

Continuous Improvement for Maintenance with Robust Reporting and Analytics

You should have real-time, anywhere access to more relevant and comprehensive data to help manage and ...
Sponsored by

Enterprise Asset Management Solution for Movable Assets in the Oil & Gas Industry

Drilling and exploration companies face several challenges in effectively managing assets both offshor...
Sponsored by

Supporting HSE Needs for Oil & Gas Through Effective Asset Management Practices

The Oil & Gas industry is constantly being challenged to find, extract and deliver cheaper an...
Sponsored by

Sesam for subsea design analysis

With the exponential growth in the subsea sector, a new set of challenges now face the industry. Mostl...
Sponsored by

Is the gas delivery system you’re looking at able to meet your power generation needs: a hydraulic engineer’s perspective

The hydraulic characteristics, and system response to demands and supplies, of natural gas pipelines a...
Sponsored by

Available Webcasts



Optimizing your asset management practices to mitigate the effects of a down market

When Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST



On Demand

Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected