MARKET WATCH: Sandy, stronger dollar take toll on oil prices

Energy markets lost more momentum last week as Hurricane Sandy took its toll on investors' appetite, said analysts at Raymond James & Associates Inc. “The S&P 500 closed down 1% after three trading sessions as the market's focus shifted to domestic shores and corporate earnings,” they said. “Crude and gas both posted losses for the week, driven by storm-related demand concerns, while the OSX also gave up 2%.”

They said, “Although most investors will rightly concentrate on the results of the US presidential election, some will also scrutinize another ballot this week.”

The ever-strengthening US dollar also is putting pressure on crude oil prices, noted Walter de Wet at Standard New York Securities Inc., the Standard Bank Group.

“According to the latest [US Commodity Futures Trading Commission] data, net speculative length continued to fall with 11.6 million bbl lost this past week,” De Wet noted. “The liquidation was unsurprising, given concerns over refinery shutdowns early last week due to Hurricane Sandy. Underlying the net deterioration was another increase in shorts (7.1 million bbl). Liquidation of longs picked up pace with 4.5 million bbl sold this past week (2.1 million bbl in the previous week).”

He said, however, “Given that the market has been preoccupied with high inventory levels and weaker demand in the US, we might see some confidence return to crude oil markets after last week’s data flow. First, there were some encouraging numbers on the US economy. Second, the [US Department of Energy] reported a strong drawdown in US crude oil inventories (2 million bbl), while many had been expecting a continued build.”

He said, “However, the full impact of Hurricane Sandy on crude oil markets is yet to be determined. The unknown at the moment is how the shutdown of East Coast transportation will affect product demand—this should contain any upside for product prices and should also be a negative for crude oil prices.”

Energy prices

The December contract for benchmark US light, sweet crudes lost $2.23 to $84.86/bbl Nov. 2 on the New York Mercantile Exchange. The January contract fell $2.17 to $85.40/bbl. On the US spot market, West Texas Intermediate at Cushing was down $2.23 to $84.86/bbl.

The front-month December contract for heating oil declined 8.58¢ to $2.95/gal on NYMEX. Reformulated stock for oxygenate blending for the same month fell 6¢ to 2.57/gal.

The December natural gas contract fell 14.5¢ to $3.55/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., decreased 11¢ to $3.39/MMbtu.

In London, the December IPE contract for North Sea Brent dropped $2.49 to $105.68/bbl. Gas oil for November fell $17.25 to $925/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes fell $1.20 to $105.06/bbl.

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