MARKET WATCH: Crude prices rebound; gas futures price falls

Crude prices rebound, up 0.8% Jan. 24 in the New York market, but the front-month natural gas futures contract fell 3%.

The Energy Information Administration reported the withdrawal of 172 bcf of natural gas from US underground storage in the week ended Jan. 18, week, above the Wall Street consensus for a 169 bcf draw. That left 2.996 bcf of working gas in storage, down 157 bcf from a year ago but 320 bcf above the 5-year average (OGJ Online, Jan. 24, 2013).

The crude price increase was “largely driven by supportive macroeconomic data from the US, China, and the Euro-zone,” said analysts in the Houston office of Raymond James & Associates Inc. As for the equity market, they said, “Despite strong earnings performance reported by many blue chips, the Standard & Poor’s 500 Index ended the day barely up as its largest component canceled out much of the broader market strength. While earnings continued to steal the spotlight, positive economic data including lower jobless claims supported the longest winning streak for the S&P since 2006.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “The US crude oil benchmark has enjoyed a stellar start to the year, building on momentum that began mid-December,” with the front-month contract up “an impressive 5.97% or $5.41/bbl” so far this year.

He said, “While some of this is attributable to growing optimism over global crude oil demand (improving macroeconomic indicators in the US and China—the two largest consumers of oil), there have also been unique factors supporting the West Texas Intermediate contract, as evidenced in Brent’s more muted 2.01% gain year-to-date.”

One such factor is the opening of the expanded Seaway Pipeline in January and its potential for reducing the inventory glut at Cushing, Okla. “In fact, it was the expectation of this that started WTI’s ascent in December,” said Ground. However, he cautioned, “Support for WTI coming from this angle could be overdone.”

Ground reported, “Another factor lending WTI support more recently was the US Congress deciding to push the debt ceiling limit out to May 19, although most support came from the expectation of the bill being passed, with a relatively muted reaction once this expectation became a reality.” Nevertheless, he said, “Our concerns over this quarter are not completely allayed as, in our opinion, a significant amount of fiscal uncertainty remains…. We feel that there is still considerable potential for damage to investor and consumer confidence and, ultimately, growth (and oil demand) over the next 2 months.

Ground believes that, from a fundamental perspective, WTI prices are due for an imminent downward correction.

 

Energy prices

The March contract for benchmark US light, sweet crudes regained 72¢ to $95.95/bbl Jan. 24 on the New York Mercantile Exchange. The April contract took back 70¢ to $96.45/bbl. On the US spot market, WTI at Cushing was up 72¢ to $95.95/bbl.

Heating oil for February delivery inched up 0.83¢ to $3.09/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 2.91¢ to $2.86/gal.

The February natural gas contract fell 10.8¢ to $3.45/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., recouped 1¢ to $3.56/MMbtu.

In London, the March IPE contract for North Sea Brent continued its advance, up 48¢ to $113.26/bbl. Gas oil for February increased $5.25 to $976/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 17¢ to $109.88/bbl.

Contact Sam Fletcher at samf@ogjonline.com

 

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