MARKET WATCH: Bearish report pulls down gas price as crude rebounds

The front-month crude contracts on Feb. 14 regained part of their previous losses in the New York market, but natural gas fell 4.3% after a smaller-than-expected withdrawal from US underground storage.

“Crude futures rose 0.4% on higher anticipated gasoline demand,” said analysts in the Houston office of Raymond James & Associates Inc. “Energy led the way [up in larger markets] as investor sentiment surrounding oil field services improved following a sizeable equity offering by a large E&P company to fund increased drilling in the Wolfcamp-Spraberry prospective.” The Oil Service Index rallied 3.1%, while the SIG Oil Exploration & Production Index dropped 1.2% on mixed commodity price movements.

Pioneer Natural Resources Co. announced a public offering of 9 million shares of its common stock at $128/share, with part of the proceeds to be used to accelerate horizontal appraisal drilling in the northern portion of its highly prospective Wolfcamp-Spraberry acreage position in West Texas.

“Separately several large mergers and acquisitions were announced, adding to $47 billion on the day—the second week in a row where M&A deals have breached $45 billion in a 24-hr period,” Raymond James analysts reported. Traders will be concentrating today on releases of new economic data, they said.

Analysts at Barclays Capital Commodities Research, New York, said, “Crude oil markets have had a generally positive week, with the front-month Brent contract settling above $118/bbl on most days. Natural gas prices tumbled due to the third smaller-than-consensus storage withdrawal in a row. We remain neutral towards prices as the miss does not significantly move the needle on the end-of-season storage estimates at the moment.”

US inventories

The Energy Information Administration reported the withdrawal of 157 bcf of natural gas from US underground storage in the week ended Feb. 8, less than Wall Street’s consensus for a 166 bcf take. That left 2.527 tcf of working gas in storage, down 270 bcf from a year ago but 348 bcf above the 5-year average (OGJ Online, Feb. 14, 2013).

Raymond James analysts reported, “Excluding weather-related demand, this week there was 1 bcfd more natural gas added to storage than this time last year, and we have averaged 1 bcfd tighter over the past 4 weeks. With peak withdrawals over, we expect to end the withdrawal season in the 2.3-2.4 tcf range, not much a deficit compared [with] last year; however, if we use the same number of injections as last year, it looks like we could end storage at around 3.8-3.9 tcf again.”

Energy prices

The March and April contracts for benchmark US light, sweet crudes regained 30¢ each to $97.31/bbl and $97.90/bbl, respectively, Feb. 14 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., was up the same amount to match the front-month futures contract’s close of $97.31/bbl.

Heating oil for March delivery inched up 0.49¢ but closed essentially unchanged at a rounded $3.22/gal on NYMEX. Reformulated stock for oxygenate blending for the same month jumped 8.12¢ to $3.12/gal.

The March natural gas contract immediately dropped 10¢ when EIA released its weekly gas storage report, finishing the session down 14.3¢ at $3.16/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 0.9¢ to $3.28/MMbtu.

In London, the new front-month April IPE contract for North Sea Brent increased 12¢ to $118/bbl. Gas oil for March picked up 25¢ to $1,011.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 27¢ to $114.67/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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