MARKET WATCH: Middle East tensions raise energy prices

Energy prices escalated Oct. 9 with crude oil up 3.4% in the New York market, approaching Oct. 1 levels, as increased tensions in the Middle East—primarily between Turkey and Syria—overshadowed the slowdown in economic growth.

“Natural gas futures also rose 1.9% as some investors are anticipating a bullish injection [into US underground storage] after a recent cool spell,” said analysts in the Houston office of Raymond James & Associates Inc. “The Oil Service Index and SIG Oil Exploration & Production Index followed commodities higher, ending the day up 0.8% and 2.2%, respectively.” Crude and gas prices were still climbing in early trading Oct. 10.

“Reformulated stock for oxygenate blending (RBOB) and heating oil also posted impressive gains,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Clearly participants remain preoccupied with the Turkish-Syria conflict, forgetting recent concerns over the possible glut of US crude oil inventories.”

He said, “Perhaps focus will again shift to US crude production (which reached a 15-year high last week) and gasoline supply (as East Coast refineries come back on line)” following this week’s report on petroleum inventories. The Energy Information Administration’s report was delayed by the Oct. 8 Columbus Day holiday when federal offices were closed. Report of a large build in oil inventories “could spark some downside,” Ground said.

However, EIA’s annual winter fuels report indicated consumers likely will pay more to heat their homes this year simply because this winter is likely to be colder than last winter, which was the warmest on record. EIA speculated heating oil bills will increase 20%.

Although heating bills will be up 15% for natural gas, 13% for propane, and 5% for electricity from last year, those costs will be less than the historical average because prices for those energy sources remain relatively low.

Energy prices

The November contract for benchmark US light, sweet crudes jumped $3.06 to $92.39/bbl Oct. 9 on the New York Mercantile Exchange. The December contract escalated by $3.05 to $92.78/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $3.06 to $92.39/bbl.

Heating oil for November delivery rose 5.89¢ to $3.20/gal on NYMEX. RBOB for the same month gained 6.56¢ to $2.96/gal.

The November natural gas contract was up 6.4¢ to $3.47/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., declined 1.2¢ to $3.18/MMbtu.

In London, the November IPE contract for North Sea Brent climbed $2.68 to $114.50/bbl. Gas oil for October increased $8.50 to $1,002/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes regained $1.59 to $109.46/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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