MARKET WATCH: Crude oil market ends 3-day selloff

Except for a 0.11% decline in the front-month US crude contract, other energy commodities ended Sept. 20 a 3-day selloff that slashed oil prices by 7%.

“Momentum has, however, slowed this morning with not much data flow or news to push the market in any particular direction,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “It doesn’t appear as if this situation will change, so barring any unexpected developments, we foresee a relatively steady [market] for crude oil prices. We might see some profit-taking ahead of the weekend, although equity markets look fairly buoyant, so sentiment seems supportive rather than resistant.”

In Houston, analysts at Raymond James & Associates Inc. noted the Japanese government wants to “de-link” LNG pricing from crude. “As the world's largest LNG importer, Japan has long been the de facto price setter in Asia-Pacific, a region where virtually all LNG is sold under long-term contracts with pricing linked to crude oil at ratios close to BTU parity,” the analysts said. “In the context of its sharply increased LNG import requirement following the Fukushima disaster and shutdown of many nuclear reactors, it is not surprising that Japan—to put the matter simply—wants to pay less. However, touting the potential of cheap LNG purchases from North America as Japanese officials are doing is not going to change the reality that the Mid-East and increasingly Australia, will be the dominant LNG suppliers for Japan (as well as China and Korea) over the next decade.” They projected LNG exports from North America won’t reach “critical mass” until 2018 “at the earliest.”

In other news, US Department of Labor officials reported Sept. 21 unemployment rates increased in 26 states in August, including 7 of 11 important swing states in the November presidential election. They said only 96,000 new jobs were added in August, down from a gain of 141,000 in July and an average increase of 226,000/month in the first quarter.

Energy prices

The October contract for benchmark US light, sweet crudes declined 11¢ to $91.87/bbl Sept. 20 on the New York Mercantile Exchange. The October contract regained 12¢ to $92.42/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., closed at $91.87/bbl in step with the front-month futures contract.

Heating oil for October delivery increased 5.35¢ to $3.10/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 7.54¢ to $2.90/gal.

The October natural gas contract recouped 3.5¢ to $2.80/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., reclaimed 6.4¢ to $2.76/MMbtu.

In London, the November IPE contract for North Sea Brent was up $1.84 to $110.03/bbl. Gas oil for October rebound $5 to $963.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes fell $2.55 to $105.88/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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