MARKET WATCH: Cold weather forecasts lift oil, gas prices

Forecasts of colder weather in the US lifted both oil and natural gas prices Jan. 14 with crude overcoming initial weakness to continue its recent daily see-saw pattern in the New York market.

“Heating oil prices soared, lifting crude oil markets with it, on the expectations of increased demand after what has up until now been a relatively mild winter,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Asian markets failed to sustain the upward thrust, perhaps a little concerned over the US fiscal woes that are still looming.”

In Houston, analysts with Raymond James & Associates Inc. reported, “The broader markets ended the trading session mixed amid earnings season. Crude and natural gas advanced 0.6% and 1.4%, respectively, the latter driven by cold weather forecasts for the Northeast.” The Oil Service Index dropped 1% and the SIG Oil Exploration & Production Index declined 0.2%. The Standard & Poor’s 500 Index and crude and gas prices were down in early trading Jan. 15 “after weak economic data from Germany,” Raymond James analysts said.

PIRA Energy Group in New York City reported West Texas Intermediate’s discount to Atlantic Basin light crudes narrowed slightly in December, “beginning the move toward the single-digit discounts expected later this year. Light grades in Canada, North Dakota, and Wyoming strengthened on the prospect of improved first quarter fundamentals, while Canadian heavy grades and all Midland grades weakened on worsening first quarter fundamentals. US crude and condensate production for October rose.”

Total US commercial oil stocks increased during the week ended Jan. 4, “with crude and the four major products showing the largest weekly build since 2009,” PIRA analysts said. “Total commercial stocks are now back above the 5-year range of US oil inventories.” They expect the weekly inventory report scheduled for release Jan. 16 will show a continued increase in crude and the three major light products.

On the other hand, they noted, “The production of ethanol-blended gasoline the week ending Jan. 4, was the lowest since February 2010, resulting from the lowest gasoline output since September 2008 and a sharp drop in the percentage of gasoline containing ethanol. Only 7.1 million b/d of ethanol-blended gasoline [were] manufactured, down sharply from 7.8 million b/d in the prior week. US ethanol output rose to 826,000 b/d from 807,000 b/d in the previous week as some plants picked up their production following the holidays.”

PIRA analysts said, “Overall, Saudi formula prices for February appear to be in line with market expectations, with only small changes that were directionally consistent with alternative crude economics. February formula prices for Asia rose relative to January prices. In contrast, February prices for Northwest Europe declined month-on-month, with the exception of for Arab Extra Light.”

Energy prices

The February contract for benchmark US sweet, light crudes rose 58¢ to $94.14/bbl Jan. 14 on the New York Mercantile Exchange. The March contract gained 60¢ to $94.59/bbl. On the US spot market, WTI at Cushing, Okla., matched the front-month futures contract, up 58¢ to $94.14/bbl.

Heating oil for February delivery rebound by 5.4¢ to $3.06/gal on NYMEX. Reformulated stock for oxygenate blending for the same month took back 1.46¢ to $2.75/gal.

The February natural gas contract climbed 4.6¢ to $3.37/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 19.2¢ to $3.39/MMbtu.

In London, the February IPE contract for North Sea Brent was up $1.24 to $111.88/bbl. Gas oil for February climbed $14.75 to $954.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dipped 14¢ to $108.06/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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