MARKET WATCH: Crude, gas prices down in New York market

The front-month crude contract dropped 0.8% Feb. 7 in the New York market as the Euro-zone economic crisis again came to the fore. Natural gas fell 3.9% on a bearish inventory report.

Both oil and gas prices were up in early trading Feb. 8 as snow began to fall in the Northeast US ahead of a “possibly historic blizzard” this weekend. Many public schools were closed and some 3,700 commercial airline flights were canceled, although the heaviest snowfall is predicted overnight and into Feb. 9.

“After some initial upside, oil markets started to move lower [Feb. 7] as the dollar strengthened, particularly against the euro after [European Central Bank President Mario] Draghi warned about the growth hampering potential of a strong euro,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

However, he reported, “Heightened geopolitical tensions after Iran rebuffed US overtures concerning talks around Iran’s nuclear enrichment program saw Brent stage a recovery, leaving West Texas Intermediate behind, as the US benchmark was unable to shake off concerns over the glut at Cushing, Okla., (the delivery point for the WTI contract) after it has emerged recently that capacity of the expanded Seaway Pipeline will be limited until later this year. The Iranian authorities announced yesterday that they would not entertain having direct talks with the US [as offered by US Vice President Joseph R. Biden Jr.] while subject to sanctions.”

Geopolitical concerns “drove the wedge between WTI and Brent deeper.” Ground said, “The spread between the two benchmarks closed at $21.41/bbl, the highest we’ve seen since mid-December before Seaway Pipeline optimism started to steadily eat away at the spread.”

Ground said, “Strong trade data out of China has also bolstered confidence in the global demand outlook for crude oil. China’s trade performance was stronger than expected in January. The surplus came through at $29.15 billion, with exports rising 25% and imports 28.8%; both well above consensus expectations. Exports to the European Union rose an annual 5.2%, which is the biggest rise in 13 months while the 14.5% rise to the US was the strongest in 10 months. Net oil imports rose to 5.88 million b/d, the highest we’ve seen since May.”

It was reported Feb. 8 EU leaders after 2 days of negotiations agreed to a €960 billion ($1.3 trillion) budget, a major reduction from the previous proposal and the first budget decrease in the union's history. The EU Parliament must approve the deal, and many of its members oppose a drastic reduction.

US inventories

The Energy Information Administration reported the withdrawal of 118 bcf of natural gas from US underground storage in the week ended Feb. 1, less than Wall Street’s consensus for a pull of 125 bcf. That reduced gas in storage to 2.684 tcf, down 226 bcf from the comparable period in 2012 but 351 bcf above the 5-year average (OGJ Online, Feb. 7, 2013).

Analysts in the Houston office of Raymond James & Associates Inc. reported, “Excluding weather-related demand, this week there was 300 MMcfd more natural gas added to storage than this time last year, and we have averaged 1.5 bcfd tighter over the past 4 weeks. With another warmer-than-normal winter heating season, the gas markets have weakened, realizing that prices need to stay low enough to help improve demand.”

RJA analysts note next week's forecast suggests a return to more normal weather pattern, and they “expect incrementally smaller withdrawals from here on out as we have passed the typical peak withdrawal period.”

Energy prices

The March contract for benchmark US light, sweet crudes fell 79¢ to $95.83/bbl Feb. 7 on the New York Mercantile Exchange. The April contract dropped 74¢ to $96.35/bbl. On the US spot market, WTI at Cushing was down 79¢ to $95.83/bbl.

Heating oil for March delivery rebound 1.37¢ to $3.20/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, lost 3.98¢ to $3/gal.

The March natural gas contract tumbled 13.3¢ to $3.29/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.3¢ but closed virtually unchanged at a rounded $3.38/MMbtu.

In London, the March IPE contract for North Sea Brent climbed 51¢ to $117.24/bbl.

Gas oil for February gained $2.75 to $1,014.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes continued to rise, up 57¢ to $113.67/bbl.

Contact Sam Fletcher at samf@ogjonline.com

 

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