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MARKET WATCH: Energy prices climb in unsteady market

Energy prices escalated July 19 as traders shrugged off disappointing economic data early in the sessions. Crude gained 3% in the New York market amid continued concerns over unrest in the Middle East, and natural gas increased 1%.

Earlier reports showed sales of existing homes dropped 5.4% in June to the lowest level of the year, while initial claims for unemployment benefits rose sharply to 386,000, last week, exceeding the consensus forecast of 365,000. “On the other hand, the markets were provided some relief from earnings results as a wave of companies beat bottom line estimates despite missing top line projections,” said analysts in the Houston office of Raymond James & Associates Inc. The SIG Oil Exploration & Production Index and the Oil Service Index mirrored broader markets, up 1% each for the day.

However, markets fell in early trading July 20 as the European economic crisis bubbled over again. Other Euro-zone members officially approved the bailout of Spain’s troubled banks, but investors remain unsatisfied. The country’s benchmark stock index dropped 6% while the government’s borrowing costs climbed above 7%. Italy's borrowing costs also increased as the debt crisis spread to that country his country.

In the US, the US Department of Labor said unemployment rates increased in 27 states through June, the biggest spread in nearly a year. US employers created only 80,000 new jobs in June, the third consecutive month of weak growth. US unemployment remains stuck at 8.2%. Other data indicated a slowdown in demand growth for automobiles in the first weeks of July.

Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, reported, “Some support for Brent has come from better-than-expected gasoline demand in the US and a higher [price for] West Texas Intermediate. Short-covering of crude futures positions helped push Brent above $107/bbl July 19, but De West questions “the sustainability of a rally beyond this level in the face of more dollar strength and economic data releases that may yet again disappoint on the downside.” He said, “As a result, we believe that from $107/bbl, on a risk-return basis, there is little value in adding new longs.”

Energy prices

The August contract for benchmark US light, sweet crudes climbed $2.79 to $92.66/bbl July 19 on the New York Mercantile Exchange. The September contract jumped $2.80 to $92.97/bbl. On the US spot market, WTI at Cushing, Okla., was up $2.79 to $92.66/bbl.

Heating oil for August delivery gained 6.94¢ to $2.95/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 5.55¢ to $2.94/gal.

The August natural gas contract increased 2.6¢ to $3/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., bumped up 13¢ to $2.99/MMbtu.

In London, the September IPE contract for North Sea Brent climbed $2.64 to $107.80/bbl. Gas oil for August escalated $19.50 to $925.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.98 to $103.71/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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