MARKET WATCH: Natural gas prices flop as oil prices rebound

The front-month natural gas contract fell 7% Dec. 14 in the New York market following the report of a rare December injection in US underground storage the previous week. Oil prices rose, recouping some of the losses from the previous session, although oil remained range-bound during last week.

It marked “the seventh consecutive down session for gas and a 15% sell-off since Thanksgiving [Nov. 22],” said analysts in the Houston office of Raymond James & Associates Inc. The price drop resulted from “abnormally warm weather across the country,” they said. However, gas prices were up in early trading Dec. 17 while oil prices were down again.

The Energy Information Administration earlier reported the injection of 2 bcf of natural gas into US underground storage in the week ended Dec. 7 in opposition to Wall Street’s consensus for a 3 bcf withdrawal.

In the equity market, Raymond James analysts said, “Investors were once again cautious last week, staying on the sidelines amid the lack of progress in fiscal cliff talks, though apparently a millionaire tax may be in the offing as a compromise. With the Standard & Poor’s 500 Index down only fractionally, energy stocks underperformed the broader market by a significant margin.” The Oil Service Index dropped 3%, and the SIG Oil Exploration & Production Index lost 2%.

With federal budget negotiations still stalled as the country swiftly approaches the yearend fiscal cliff of automatic tax raises and spending cuts, Raymond James analysts said two commodities already have been adversely affected. “Ethane prices have plummeted to 10-year lows, while propane is beginning to approach historical lows experienced last winter, which was one of the warmest on record,” they said. “Ethane and propane prices are down 72% and 47%, respectively, since the beginning of the year.” They attributed the price collapse to “extremely high inventories, which were influenced by rapidly growing supplies, a warm winter, and ethylene plant turnarounds slowing demand.”

Energy prices

The January contract for benchmark US light, sweet crudes regained 84¢ to $86.73/bbl Dec. 14 on the New York Mercantile Exchange. The February contract took back 81¢ to $87.25/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., followed the front-month futures contract up 84¢ to $86.73/bbl.

Heating oil for January delivery advanced 3.7¢ to $2.98/gal on NYMEX. Reformulated stock for oxygenate blending for the same month climbed 6¢ to $2.66/gal.

The January natural gas contract continued its retreat, however, dropping 3.3¢ to $3.31/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 11.2¢ to $3.15/MMbtu.

In London, the January IPE contract for North Sea Brent recovered $1.24 to $109.15/bbl. Gas oil for January recouped $2.25 to $922.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 24¢ to $105.77/bbl. With few days left in this year, OPEC’s basket price so far has averaged $109.55/bbl, compared with an average $107.46/bbl for all of 2011.

Contact Sam Fletcher at samf@ogjonline.com.

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