MARKET WATCH: Energy prices react to mixed economic signals

Crude oil prices continued rising and natural gas prices continued to fall Sept. 7 following a US Department of Labor report of 96,000 new US jobs in August, fewer than expected.

DOL officials also reported US unemployment dropped to 8.1% from 8.3% in July, but the decline was triggered primarily by the growing number of workers who have given up looking for nonexistent jobs and who therefore are not included in unemployment figures. Construction and manufacturing also slowed, with the US workforce now at its lowest level in 31 years, officials said (OGJ Online, Sept. 7, 2012).

The price of crude initially declined in that session on concerns weak jobs and payroll data signaled reduced US demand for oil. “However, almost immediately focus seemed to shift to the greater possibility of the US Federal Reserve easing in light of the poor numbers,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “This saw prices push higher, with the net effect seeing prices end the day higher, although not as strongly as was seen amongst the precious metals.”

Fed officials are scheduled to meet later this week. Markets have been hoping for months the Fed will do something to stimulate the US economy. Despite previous inaction, traders are again hopeful this week something positive will come from that meeting.

Meanwhile, crude prices fell in early trading Sept. 10 when new data showed a surprising drop in Chinese imports of oil in August as that country’s economy continued to slow. China has been a primary driving force behind increased world demand for crude. But its imports dropped 12.5% on annual basis in August, although still up 7.4% through the first 8 months of 2012 compared with 2011. A weaker euro and stronger dollar also undercut oil prices Sept. 10.

Analysts at KBC Energy Economics, a division of KBC Advanced Technologies PLC, discerned signals last week US gasoline inventories will soon bottom out despite a pending refining switch to higher distillate yields as winter approaches.

KBC officials further noted member nations of the Organization for Economic Cooperation and Development complain the long-running Euro-zone crisis poses the greatest risk to global economic growth as recessionary pressures mounted for the 17-nation euro bloc. The gross domestic product forecast for Germany, Europe’s economic powerhouse, was cut to 0.8% from 1.2%. The group also lowered its growth outlook in the US by 0.1% to 2.3%, and Canadian growth was cut by 0.3% to 2.2%. “Despite a positive movement for Japan as economic growth was forecast to be up 0.2% to 2.2% from previous estimates, overall this was far from pleasing news for developed economies. This does not bode well for the future demand for commodities, especially oil,” KBC analysts said.

Energy prices

The October contract for benchmark US light, sweet crudes rose 89¢ to $96.42/bbl Sept. 7 on the New York Mercantile Exchange. The November contract climbed 90¢ to $96.75/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 89¢ to $96.42/bbl.

Heating oil for October delivery inched up 0.64¢ to $3.15/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 2.86¢ to $3.02/gal.

The October natural gas contract dropped 9.4¢ to $2.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 11.1¢ to $2.73/MMbtu.

In London, the October IPE contract for North Sea Brent increased 76¢ to $114.25/bbl. Gas oil for September lost $5.25 to $985.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 20¢ to $111.55/bbl. So far this year, OPEC’s basket price has averaged $110.17/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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