MARKET WATCH: Oil prices retreat, gas rebounds in mixed markets

Crude oil posted small losses Nov. 12 in New York and London while natural gas rebounded in both the US futures and cash markets.

Although the front-month futures contract for Brent suffered “a marginal loss,” the price of the North Sea benchmark crude is supported by “concerns over a loss of Nigerian production,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

Such support increased Brent’s premium over West Texas Intermediate to $23.50/bbl Nov. 12—“the widest the spread has closed since October last year,” Ground reported. However, he said, “There is room for this spread to narrow,” although supply-demand differences are “enough to keep the spread from closing too dramatically.”

A stronger dollar vs. the euro weighed on oil prices Nov. 13 after EU finance ministers granted Greece 2 more years to achieve its budget deficit target of 2% of gross domestic product. “However, there has been some concern that a decision on how to provide for an additional $41 billion in Greek financing needs was postponed to next week. For the moment, attention has returned to the Euro-zone crisis, although there has not been any significant progress on the US’s fiscal cliff,” Ground said.

In Houston, analysts with Raymond James & Associates Inc. said, “Greece is still broke but the likelihood of German Chancellor Angela Merkel picking up the tab hasn't improved.” They said, “With a 3.5% decline in Japanese GDP adding to the gloom, it's no wonder equity investors were lacking enthusiasm” during the Nov. 12 trading sessions.

They noted the International Energy Agency lowered its fourth-quarter demand forecast by 290,000 b/d to 90.1 million b/d because of economic weakness in Europe and the negative effect of Hurricane Sandy on US demand and supply. IEA slightly lowered its demand growth outlook for all of 2012 by 60,000 b/d to 89.7 million b/d, with its 2013 demand forecast unchanged at 90.5 million b/d. However, Raymond James analysts “remain less optimistic about a demand surge next year and are currently forecasting 90.2 million b/d.”

Production from the Organization of Petroleum Exporting Countries fell 30,000 b/d to a 9-month low of 31.15 million b/d in October to 31.15, despite Iran curbing its 7-month supply downtrend with a slight uptick in output. Outside of OPEC, after the completion of seasonal maintenance and excepting weather disruptions that affected September output, supply rebound by 840,000 b/d in October to 53.4 million b/d, they said.

Energy prices

The December contract for benchmark US sweet, light crudes retreated 50¢ to $85.57/bbl on the New York Mercantile Exchange. The January contract declined 48¢ to $86.07/bbl. On the US spot market, WTI at Cushing, Okla., followed the front-month futures contract down 50¢ to $85.57/bbl.

Heating oil for December delivery dipped 0.63¢ to $3/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 2.29¢ to $2.68/gal.

The December natural gas contract took back 6.7¢ to $3.57/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., recouped 9.1¢ to $3.41/MMbtu.

In London, the December IPE contract for North Sea Brent was down 33¢ to $109.07/bbl. Gas oil for November remained unchanged at $930.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes climbed 38¢ to $106.59/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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