MARKET WATCH: Crude, gas up for the week in NY market

Front-month oil contracts were down across the board Jan. 11 while natural gas continued climbing, but both crude and gas posted net increases in the New York market over the whole business week.

“Crude traded up 1% on the week on news of a Saudi Arabia production cut in December while natural gas also gained modestly as a bullish inventory draw crossed the 200 bcf mark for the first time this winter season,” said analysts in the Houston office of Raymond James & Associates Inc.

They said, “Following the last-minute budget deal in Congress [on Jan. 1], the stock market has done very well in the new year thus far, even bringing the Standard & Poor’s 500 Index to a 5-year high. Subsequently, equity funds (including Exchange Traded Funds and mutual funds) took in $18.3 billion for the week ended Jan. 9, one of the largest net inflows in years. Whether this is the beginning of a broader, more sustained ‘risk-on’ movement by investors is anybody's guess.”

Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, said, “Like many other commodities, crude oil is finding support from buoyant equity markets. Further support comes from a weak US dollar. The weaker dollar combined with strong equity markets should provide good support to oil on dips.”

Crude and natural gas futures along with the S&P 500 Index were up in early trading Jan. 14, pending comments later in the day by Federal Reserve Chairman Ben Bernanke concerning continued open-ended quantitative easing.

The Brent front-month contract rose above $111/bbl in early trading while the similar contract for benchmark US crude was above $94/bbl. However, De Wet said, “Brent has failed to sustain a move above $112/bbl since October—we expect this will remain the case this week.”

Standard Bank Group analysts ascribed much of the renewed interest in US crude futures to anticipation last week of the Jan. 11 reopening of the Seaway pipeline following its expansion to 400,000 b/d capacity from 150,000 b/d. “The opening of the pipeline should help reduce the glut of crude oil inventory at Cushing, Okla.,” they said.

De Wet said, “While we feel that this pipeline will be a welcome outlet for crude flowing into Cushing, production from the north of the continent continues to grow (Dakota shale and Canadian crude) and, therefore will continue to pressurize Cushing stockpiles.”

Energy prices

The February contract for benchmark US light, sweet crudes dipped 26¢ to $93.56/bbl Jan. 11 on the New York Mercantile Exchange. The March contract declined 28¢ to $93.99/bbl. On the US spot market, West Texas Intermediate at Cushing accompanied the front-month crude futures contract down 26¢ to $93.56/bbl.

Heating oil for February delivery decreased 4.58¢ to $3.01/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 5.38¢ to $2.74/gal.

The February natural gas contract, however, escalated 13.4¢ to $3.33/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 12.4¢ to $3.20/MMbtu.

In London, the February IPE contract for North Sea Brent lost $1.25 to $110.64/bbl. The new front-month February contract for gas oil fell $19.50 to $939.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was down $1.10 to $108.20 bbl. So far this year, OPEC’s basket price has averaged $108.77/bbl, compared with an average $109.45/bbl for all of 2012.

Contact Sam Fletcher at samf@ogjonline.com.

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