MARKET WATCH: Oil prices rise in mixed market but gas ‘falls off cliff’

Markets were mixed Jan. 28 with front-month crude posting a moderate gain after a marginal loss in the previous session of the New York futures market. Despite winter storm warnings from Montana to New Mexico, natural gas prices “fell off a cliff following a warmer winter forecast for the eastern US,” said analysts in the Houston office of Raymond James & Associates Inc.

There was an initial surge in crude prices following report of better-than-expected orders for US durable goods. However, that “was quickly reversed on what appears to be some profit taking,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Afterwards, the market regained its composure and ground steadily higher, as participants eagerly await the plethora of US data flow this week.”

In broader markets, the Standard & Poor’s 500 Index dipped 0.2% to end its longest rally in 8 years. Raymond James analysts said, “Some investors are understandably cautious as the S&P sits near an all-time high.” The Oil Service Index increased 0.5%, but the SIG Oil Exploration & Production Index was down 1.6%.

Meanwhile, the Conference Board reported the US consumer confidence index fell 8.1 points in January to 58.6, the lowest level in more than a year, with US workers taking home less pay because of higher Social Security taxes. It marked the third consecutive month of declines after the index posted a 5-year high in October 2012.

In other news, Raymond James analysts cited a McClatchy News report that Israeli intelligence now estimates Iran will not be capable of building a nuclear weapon before 2015-16. “This marks a significant departure from comments made by Israeli Prime Minister Benjamin Netanyahu at the United Nations last September when he said Iran would be in the final stages of its nuclear program this spring or summer. It appears the slower-than-expected progress has been a function of both operational mishaps, potentially including foreign sabotage, and a deliberate slowdown by the Iranians.”

Whatever the reason, they said, “Any sign the Israeli government is becoming less concerned about an imminent Iranian threat is likely to reduce the associated risk premium in oil prices. To be sure, a multitude of other Middle Eastern concerns have influenced oil prices—Syria, Libya, Israel-Gaza, Egypt, and most recently, Algeria—but Iran is by far the most significant factor, given the risks to the Strait of Hormuz.”

Energy prices

The March contract for benchmark US sweet, light crudes rose 56¢ to $96.44/bbl Jan. 28 on the New York Mercantile Exchange. The April contract gained 54¢ to $96.87/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up 56¢ to $96.44/bbl.

Heating oil for February delivery increased 0.48¢ but closed essentially unchanged at a rounded $3.06/gal on NYMEX. Reformulated stock for oxygenate blending for the same month continued its advance, up 5.94¢ to $2.93/gal.

However, the February natural gas contract dropped 15.5¢ to $3.29/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 17.3¢ to $3.24/MMbtu.

In London, the March IPE contract for North Sea Brent was up 20¢ to $113.48/bbl. Gas oil for February increased $2.25 to $970.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 5¢ to $110.15/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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