MARKET WATCH: Natural gas prices fall in uninspired markets

Energy prices slipped lower Aug 10 in generally uninspired trading with natural gas prices falling in US markets. Commodity and equity prices were down in early trading Aug. 13 after Japan announced a weaker-than-expected annual growth rate of 1.4% in the second quarter.

Power plants switching from coal to cheaper natural gas and an “extremely warm” summer have “gradually eaten away the record storage surplus from last summer,” said analysts in the Houston office of Raymond James & Associates Inc. “For the balance of summer, we forecast that the market must remain 3.75 bcfd tighter than last year to clear the current 465 bcf storage overhang,” they said. “As a result, we believe US natural gas prices must average in the $2.50-3/Mcf range for the next 100 days.”

Therefore, they said, “With more than half of the year in the books, we are increasing our full year 2012 US natural gas forecast from $2.50 to $2.65/Mcf. That means our third quarter forecast increases from $2.25 to 2.90/Mcf and our fourth quarter estimates rise from $2.50 to $2.75/Mcf.” They are keeping their 2013 estimate at $3.25/Mcf and the 2014 estimate at $4/Mcf.

In other news, BP PLC agreed to sell its 266,000 b/d Carson, Calif., refinery to Tesoro Corp. for $2.5 billion cash, subject to post-closing adjustments. The deal is expected to close before mid-2013 and includes an associated logistics network of pipelines and storage terminals and the ARCO-branded retail marketing network in southern California, Arizona, and Nevada along with BP's interests in associated cogeneration and coke calcining operations. BP acquired the Carson refinery in 2000 with its acquisition of ARCO and put it on the block in early 2011 (OGJ Online, Feb. 1, 2011).

BP also announced sale of the Sunray and Hemphill gas processing plants in Texas to Eagle Rock Energy Partners for $227.5 million cash.

Energy prices

The September contract for benchmark US light, sweet crudes declined 49¢ to $92.87/bbl on the New York Mercantile Exchange. The October contract decreased 48¢ to $93.15/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 49¢ to $92.87/bbl.

Heating oil for September delivery dipped 2.45¢ to $3.02/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.31¢ but closed essentially unchanged at a rounded $3/gal.

The September natural gas contract fell 17.5¢ to $2.77/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 10.5¢ to $2.83/MMbtu.

In London, the September IPE contract for North Sea Brent retreated 27¢ to $112.95/bbl. Gas oil for August was unchanged at $959.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 71¢ to $109.10/bbl. So far this year, OPEC’s basket price has averaged $110.01/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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