MARKET WATCH: Crude oil prices dip; natural gas escalates 6.6%

Crude oil prices declined July 30 with front-month crude down 0.3% in New York after four sessions of modest gains, but natural gas shot up 6.6% on forecasts for high temperatures.

The broader markets closed flat pending action by the Federal Open Market Committee, the policy-making arm of the Federal Reserve Bank, which began a 2-day meeting July 31. Equity markets are hoping FOMC will announce a third round of quantitative easing (QE3) to stimulate the US economy. Fed executives have been avoiding such a move pending stronger signals of economic conditions.

“Despite the usual gyrations as markets react to US data flow (and what it might imply for QE3), crude oil markets have been generally weighed down by concerns over the Euro-zone and the accompanying euro weakness,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. However, the euro strengthened July 31, “prompting a relatively strong surge in both Brent and West Texas Intermediate.” Ground warned, however, “We would not put much faith in any rallies ahead of this week’s central bank meetings—as we’ve outlined before, we feel the market could be setting itself up for disappointment.”

He noted a large amount of US economic data scheduled for release July 31, including personal income and spending, home prices, and consumer confidence, “the most noteworthy.” The latest numbers on Chinese and Euro-zone manufacturing will be published Aug. 1. “While we expect increased volatility surrounding these releases, we also expect any reactions to these numbers to be relatively muted. The focus will remain on the FOMC announcement,” Ground said.

Meanwhile, the US Department of Commerce reported US consumer income increased 0.5% in June—the largest gain since March but trimmed to 0.3% after taxes and inflation adjustment. Savings increased to 4.4% last month, the highest for the year, while overall spending continued to slow. Spending for services increased slightly, but purchases of autos and other durable manufactured goods were down. Consumers also spent less for nondurable goods, partially the result of lower gasoline prices.

Energy prices

The September contract for benchmark US sweet, light crudes declined 35¢ to $89.78/bbl July 30 on the New York Mercantile Exchange. The October contract decreased 36¢ to $90.60/bbl. On the US spot market, WTI at Cushing, Okla., was down 35¢ to $89.78/bbl.

Heating oil for August delivery dipped 1.04¢ to $2.88/gal on NYMEX. Reformulated stock for oxygenate blending for the same month continued climbing, however, up 4.9¢ to $2.94/gal.

The new front-month September natural gas contract jumped 19.9¢ to $3.21/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 6.8¢ to $3.16/MMbtu.

In London, the September IPE contract for North Sea Brent lost 27¢ to $106.20/bbl. Gas oil for August advanced $2.25 to $913/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 2¢ to $102.94/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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