MARKET WATCH: Oil prices rose modestly day before US presidential election

Crude oil prices rose modestly on markets in New York and London Nov. 5 in anticipation of the Nov. 6 US presidential election and also while analysts awaited more news on oil and product demand following Hurricane Sandy.

Analysts said weakness in the US Dollar Index was likely to support an upside in energy prices although tight trading ranges were expected on US commodity markets Nov. 6 ahead of the presidential election results.

In an update on storm-related restoration efforts, Royal Dutch Shell PLC said it believed gasoline and distillate racks at Motiva terminals in Newark and Sewaren, NJ, are likely to reopen by midweek. Meanwhile, safety inspections and damage assessments continued at Motiva terminals in Brooklyn and Long Island, NY.

Four Sewaren diesel storage tanks were damaged during the storm last week. The US Coast Guard on Nov. 5 reopened the Arthur Kill section of the New York Harbor waterway to vessel traffic, subject to a no-wake zone.

Regarding the global economy, a Nov. 7 Greece parliamentary vote was scheduled on austerity measures while a general strike started on Nov. 6, and observers expected that the strike would halt most normal activities in Athens.

Ernst & Young reported Nov. 6 that executives of oil and gas companies are significantly less optimistic about the future of the global economy than they were 6 months ago.

Results of the E&Y’s latest Global Capital Confidence Barometer showed only 27% of the 178 oil and gas executives surveyed in August and September said they believed the global economy was improving. That compared with 55% who believed the global economy was improving when polled in April.

Dampened economic confidence and expectations around corporate earnings have led many companies to refocus on bottom-line improvements and internal performance, E&Y said, noting the appetite for oil and gas-related mergers and acquisitions has declined since earlier this year.

Andy Brogan, E&Y’s global oil and gas transactions advisory leader said, “While the majority of transactions are likely to remain at the smaller end of the spectrum, this does not rule out some larger deals where the strategic rationale is compelling.”

Results showed 61% of oil and gas respondents indicated that they view the global economic downturn as lasting at least another year. Participants said they were most negative about countries affected by the Eurozone crisis and the slowing growth of China.

Energy prices

The December contract for benchmark US light, sweet crudes gained 79¢ to $85.65/bbl Nov. 5 on the New York Mercantile Exchange. The January contract climbed 74¢ to $86.14/bbl. On the US spot market, West Texas Intermediate at Cushing was up 79¢ to $85.65/bbl.

The front-month December contract for heating oil rose 3.5¢ to $2.98/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 4.6¢ to 2.62/gal.

The December natural gas contract stayed unchanged at $3.55/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., decreased 6¢ to $3.33/MMbtu.

In London, the December IPE contract for North Sea Brent climbed $2.05 to $107.73/bbl. Gas oil for November fell $2.50 to $922.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes fell $1.64 to $103.42/bbl.

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