MARKET WATCH: Crude oil price dips, ending seven-session rally

The front-month crude contract price dipped slightly Sept. 12 in the New York futures market, ending a seven-session rally. Natural gas continued climbing, however, with the front-month contract closing above $3/MMbtu.

The euro rose to a 4-month high against the US dollar after Germany’s Constitutional Court approved that country’s involvement in the Euro-zone rescue fund. The euro maintained that lead in early trading Sept. 13 while the dollar dropped to a 7-month low against the yen, based apparently on market expectations Federal Reserve System officials will announce a third round of monetary stimulus at the end of its 2-day meeting.

Many analysts say the Fed is now more likely to try a third round of government bond purchases to reduce borrowing costs and stimulate the economy following weak jobs and other data this week.

The US Department of Labor reported Sept. 13 that 382,000 initial applications for unemployment benefits were filed last week, an increase of 15,000 from the previous week. Government officials blamed the gain at least partially on Hurricane Isaac.

The number of people receiving unemployment aid fell by 80,000 to 5.4 million in the week ending Aug. 25, according to the latest available data. The decline was credited primarily to many recipients having exhausted available benefits.

The unemployment rate dropped to 8.1% from 8.3%, due to the number of people dropped from unemployment rolls because they have given up on finding jobs. Only 96,000 jobs were added in August, down from 141,000 in July and below a monthly average of 226,000 in the first quarter.

DOL also reported wholesale prices jumped 1.7% in August primarily because of a 13.6% hike in gasoline prices, the largest gain in 3 years. Food prices were up 0.9% and are likely to climb higher in coming months because of the drought across the Midwest.

US inventories

The Energy Information Administration reported the injection of 27 bcf of natural gas into US underground storage in the week ended Sept. 7. That raised working gas in storage to 3.429 tcf. That’s 342 bcf more than gas storage in the comparable period last year and 284 bcf above the 5-year average.

EIA earlier reported commercial US crude inventories increased 2 million bbl to 359.1 million bbl last week, an above-average total for this time of year. Analysts were expecting a “relatively strong” draw of 2.9 million bbl. Gasoline stocks fell 1.2 million bbl to 197.7 million bbl in the same period, less than the 1.7 million bbl draw some expected. Finished gasoline increased while blending components decreased. Distillate fuel inventories rose 1.5 million bbl to 128.6 million bbl, yet remained below average. Analysts were expecting a 500,000 bbl dip (OGJ Online, Sept. 12, 2012).

Energy prices

The October and November contracts for benchmark US sweet, light crudes dipped 16¢ each to respective closings of $97.01/bbl and $97.34/bbl Sept. 12 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 16¢ to $97.01/bbl.

Heating oil for October delivery increased 2.95¢ to $3.22/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, dropped 4.19¢ to $3/gal.

The October natural gas contract continued to rally, up 7.1¢ to $3.06/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 10.6¢ to $2.94/MMbtu.

In London, the October IPE contract for North Sea Brent advanced 56¢ to $115.96/bbl. Gas oil for September was unchanged at $996.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 68¢ to $113.36/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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