MARKET WATCH: Hostage situation in Algeria raises crude prices

Crude prices climbed Jan. 17 for the second consecutive session as Islamic militants holding hostages at a remote BP PLC natural gas plant in Algeria raised the risk for supplies from Middle East and North Africa. Government reports of better-than-expected US housing starts and jobless claims numbers helped push crude oil markets higher in later trading.

“The Algerian hostage drama kept oil markets on edge as participants pondered a possible threat to other oil and gas facilities in the region, especially in Libya,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

Algeria's state news service reported Jan. 18 nearly 100 of the 132 foreign workers held by the rebels had been freed in a rescue attempt, but various sources indicated an unknown number of hostages were dead. Militants seized the gas plant Jan. 16 when their attempt to highjack two buses at the plant failed. Government forces then besieged the plant. It was reported the militants had wanted to trade two captive US citizens for two terrorists held in the US.

China's economy data indicated a 7.9% growth rate in the 3 months through December, up from 7.4% in the previous quarter. For 2012 as a whole, China’s growth rate was up 7.8%, its weakest performance since the 1990s, officials said.

Analysts at Barclays Capital Commodity Research said, “Crude oil markets have had a mixed week, with front-month West Texas Intermediate continuing to inch higher, crossing $95/bbl, while the equivalent Brent contract continues to move sideways. Meanwhile, near-term tightness has pushed natural gas prices upward for the week. Price action for the rest of the winter, however, will largely be weather dependent. UK gas prices jumped due to some very cold weather and the threat of some supply disruption from Algeria. Healthy storage levels for now have kept gains limited.”

A stronger dollar has been a drag on oil prices with markets still nervous over the economic crisis in the Euro-zone.

Energy prices

The February contract for benchmark US light, sweet crudes climbed $1.25 to $95.49/bbl Jan. 17 on the New York Mercantile Exchange—“its highest close since mid-September,” Ground reported. The March contract gained $1.26 to $95.94/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.25 to $95.49/bbl.

Heating oil for February delivery regained 2.21¢ to $3.02/gal on NYMEX. Reformulated stock for oxygenate blending for the same month continued to rise, up 4.7¢ to $2.77/gal.

The February natural gas contract rebound 5.9¢ to $3.49/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 3.5¢ to $3.42/MMbtu.

In London, the new front-month March IPE contract for North Sea Brent increased $1.49 to $111.10/bbl. Gas oil for February lost $2.50 to $952.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes regained 26¢ to $108.01/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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