MARKET WATCH: Energy prices jump, with crude topping $90/bbl

Energy prices escalated Dec. 26 with front-month crude spiking above $90/bbl in the New York futures market. Natural gas recouped some of its previous losses, but equity markets fell with automatic US tax increases and spending cuts less than a week away unless Congress produces a budget.

Analysts in the Houston office of Raymond James & Associates Inc. reported oil price hikes resulted primarily from political tensions in the Middle East—Egypt, Syria, Iraq, and Iran—and technical trading. Colder weather nudged gas prices higher.

However, oil, gas, and stock prices were down in early trading Dec. 27 as Congress resumed 11th hour negotiations to forge a compromise budget before falling off the fiscal cliff Jan. 1.

With lack of progress in Congress so far, the Conference Board reported its consumer confidence index dropped to 65.1 in December from 71.5 in November, which also was a loss. The current level is the lowest since August. Its December consumer expectations index declined sharply to 66.5 from 80.9. Retail merchants earlier reported the holiday shopping season this year was the weakest since 2008.

Meanwhile, the US Department of Labor reported new applications for unemployment benefits were down 12,000 to a seasonally adjusted 350,000 last week. However, the Christmas holiday may have distorted that data with unemployment offices closed Dec. 24-25 in many states and no update on figures. The total number of people receiving unemployment benefits increased 73,000 to 5.48 million in the week ended Dec. 8, the latest data available. Included were 2.1 million who have been unemployed at least 6 and receive extended benefits payments from the federal government under a program that will expire Dec. 31 unless extended by Congress.

DOL’s unemployment count doesn’t include the unknown number of people who have already used up their benefits or who have given up looking for work in this down market. It does include people who took temporary holiday jobs that will soon terminate.

In other news, the city of Richmond, Calif., finally granted a permit for Chevron Corp. to repair its 245,000 b/d Richmond refinery where a crude unit was damaged by a fire in August. The city wanted an investigation into the fire to be completed before repairs could be made. The refinery has been operating at reduced rates in the interim, which impacted not only Chevron’s third quarter results but also “the entire West Coast's fuel supply-demand balance,” Raymond James analysts reported. Chevron expects repairs to be completed and the refinery restored to full production in first-quarter 2013.

Meanwhile, Murphy Oil Corp. in El Dorado, Ark., signed a deal with Wal-Mart Stores Inc. to build more than 200 fuel stations adjacent to existing Wal-Mart stores in the next 3 years. “The Murphy USA downstream division, which already has over 1,150 retail locations, will be spun off in 2013, with shares distributed pro rata to Murphy shareholders. The agreement with Wal-Mart Stores Inc. provides visibility on station growth for the downstream spinoff,” Raymond James analysts said.

Because of the Christmas holiday, the Energy Information Administration’s weekly report of commercial oil and gas inventories is delayed until Dec. 28.

Energy prices

The February contract for benchmark US sweet, light crudes jumped $2.37 to $90.98/bbl Dec. 26 on the New York Mercantile Exchange, wiping out pre-Christmas losses. The March contract climbed $2.32 to $91.49/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $2.37 to $90.98/bbl.

Heating oil for January delivery increased 4.91¢ to $3.05/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 6.52¢ to $2.82/gal.

The January natural gas contract recouped 4.6¢ to $3.39/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., continued to climb, up 7.2¢ to $3.36/MMbtu.

In London, the February IPE contract for North Sea Brent escalated $2.27 to $111.07/bbl. Gas oil for January took back $13.75 to $941.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.01 to $106.92/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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