MARKET WATCH: Crude continues climbing in optimistic market

Crude prices continued climbing Dec. 18 amid cautious hope of progress in US budget negotiations and the return of investors to riskier assets as the dollar weakened. The front-month natural gas contract gained 1.6% on the New York market, taking back some of last week’s loss.

But in an apparent setback Dec. 19 to budget talks, President Barack Obama threatened to veto a “Plan B” backup proposal from House Speaker John Boehner and accused Republicans of political posturing. Boehner said he will call for a House vote on his plan Dec. 20.

In other news, Japan's newly elected prime minister is pushing for monetary stimulus of that economy, “aiming for 2% annual inflation in a country that has been in deflation for the better part of 2 decades,” said analysts in the Houston office of Raymond James & Associates Inc.

“Soon, Japan may be exporting not just Priuses and digital cameras but higher asset prices too. Against this backdrop, the Standard & Poor’s 500 Index jumped 1.1% yesterday, and crude followed suit,” RJA said.

US inventories

The Energy Information Administration said Dec. 19 commercial US crude inventories dropped 1 million bbl to 371.6 million bbl for the week ended Dec. 14. That was less than Wall Street’s consensus for a 1.8 million bbl draw.

Gasoline stocks climbed 2.2 million bbl to 219.3 million bbl during the same period despite an increase in blending components. Analysts were expecting a 2 million bbl gain in gasoline. Distillate fuel inventories fell 1.1 million bbl to 117 million bbl, opposite the market’s outlook for a 1 million bbl boost.

Imports of crude into the US were down 100,000 b/d to 8.4 million b/d last week. In the 4 weeks through Dec. 14, US oil imports averaged over 8.3 million b/d, down 288,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 521,000 b/d, and distillate fuel imports averaged 242,000 b/d.

The input of crude into US refineries increased 227,000 b/d to 15.6 million b/d last week with units operating at 91.5% of capacity. Gasoline production decreased to 8.9 million b/d as distillate fuel production increased to 4.9 million b/d.

Energy prices

The January and February contracts for benchmark US light, sweet crudes increased 73¢ each to $87.93/bbl and $88.40/bbl, respectively, Dec. 18 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., rose the same amount to match the front-month futures closing price of $87.93/bbl.

Heating oil for January delivery rebound 4.02¢ to $3/gal, wiping out its loss from the previous session on NYMEX. Reformulated stock for oxygenate blending for the same month climbed 3.65¢ to $2.69/gal.

The January natural gas contract continued climbing, up 6¢ to $3.42/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 7.5¢ to $3.29/MMbtu.

In London, the February IPE contract for North Sea Brent bumped up $1.20 to $108.84 from a small decline in the previous session. Gas oil for January increased $6 to $928.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 31¢ to $106.38/bbl.

Contact Sam Fletcher at


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