MARKET WATCH: Oil prices follow broader market up

Oil prices rebounded Nov. 29, pulled up by the broader market, with crude increasing 1.9% to end a 3-day decline in the New York market. Report of an increase in US natural gas inventory drove the new front-month gas contract down 4%.

The Energy Information Administration reported the injection of 4 bcf of natural gas in US underground storage in the week ended Nov. 23, while the Wall Street consensus was for the withdrawal of 6 bcf. That increased working gas in storage to 3.877 tcf, up 26 bcf from the comparable period in 2011 and 190 bcf above the 5-year average (OGJ Online, Nov. 29, 2012).

“Oil markets were up, continuing the see-saw trend of the past week,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Amid fiscal cliff concerns and continued worries about the Euro-zone debt crisis, an upward revision of US gross domestic product growth for the third quarter gladdened markets (OGJ Online, Nov. 29, 2012).”

However, he said, “While the market took encouragement from the revisions, it is worth noting that most of the upward revision was driven by inventory builds. In addition, personal consumption expenditure growth, the engine of the US economy, was revised downwards, from an initial estimate of 2% to 1.4% quarter-over-quarter. Business investment also contracted by 2.2% rather than the 1.3% that was initially estimated. The US economy remains fragile, with the uncertainty surrounding the fiscal cliff already appearing to have weighed on consumer and business confidence in the third quarter. Consequently, we don’t expect much of an improvement, if any, to be evident in fourth quarter macroeconomic data.”

Despite uncertainty surrounding budget negotiations, “opportunists” are “making some money off the ebbs and flows of the [President Barack] Obama-[House Speaker John] Boehner mystery dance,” said analysts in the Houston office of Raymond James & Associates Inc. “Yesterday, the Standard & Poor’s 500 Index jumped another 0.4%, extending the rally to 2 days. However, with President Obama’s opening bid missing the mark, it looks like the optimists may be disappointed today.”

In a private meeting with congressional leaders Nov. 29, Sec. of the Treasury Timothy Geithner presented what Democrat officials described as the opening bid in negotiations, calling for increasing taxes by $1.6 trillion over 10 years, a spending program to aid the unemployed and struggling homeowners, and legislation next year for 10-year savings from Medicare and other benefit programs totaling $400 billion.

However, Boehner, R-Ohio, said there was no substantive progress in settling the stalemate. Meanwhile, Obama is on the road in a campaign-style effort to drum up public support for his proposed solution to the pending fiscal cliff.

Energy prices

The January contract for benchmark US light, sweet crudes reclaimed $1.58 to $88.07/bbl Nov. 29 on the New York Mercantile Exchange. The February contract escalated $1.53 to $88.66/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.58 to $88.07/bbl.

Heating oil for December delivery rose 3.26¢ to $3.04/gal on NYMEX. Reformulated stock for oxygenate blending for the same month climbed 5.31¢ to $2.79/gal.

The new front-month January natural gas contract fell 15.3¢ to $3.65/MMbtu on NYMEX, however. On the US spot market, gas at Henry Hub, La., dropped 4¢ to $3.64/MMbtu.

In London, the January IPE contract for North Sea Brent was up $1.25 to $110.76/bbl. Gas oil for December jumped $16.75 to $948.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 47¢ to $107.46/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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