MARKET WATCH: Oil prices dip lower; cold weather boosts gas price

Equity and oil futures prices fell Feb. 25 with crude finishing essentially flat in the New York market, but front-month natural gas jumped 3.7% in colder weather ahead of a major snowstorm across much of the Midwest.

A stronger dollar undermined US oil prices despite the threat of escalation in geopolitical tensions as negotiations between Western and Iranian officials over the nuclear crisis opened Feb. 26.

“Today we’ve seen some support coming through, although yesterday’s highs are nowhere near in sight,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Reports that Iran might be taking a more conciliatory approach to today’s negotiations with the US, UK, France, Germany, China, and Russia are perhaps containing any upside in the geopolitical risk premium. It is hoped that a long-term agreement on the Iran nuclear enrichment program can be reached in exchange for a gradual easing of sanctions.”

However, Ground reiterated, “The distribution of risks appear to be tilted to a mild escalation of tensions this week…. With no real change in the status quo of the past few months expected, we expect at worst a temporary surge in prices. Of course, should an agreement be reached and the oil embargo be lifted, significant downside would be opened up. A signal to this possibility would be a decision to have a direct meeting between US and Iranian officials.”

In Houston, analysts with Raymond James & Associates Inc. reported, “The broader markets lost all of February's gains yesterday as the Dow Jones Industrial Average lost 1.6% in the largest decline since Nov. 7. The large selloff came as reports suggested the Italian government may be heading for further uncertainty following stalemate elections as Italian citizens increased support of anti-austerity candidates.” The Oil Service Index and the SIG Oil Exploration & Production Index again followed the broader markets down, losing 3.3% and 3.5%, respectively.

Energy prices

The April contract for benchmark US sweet, light crudes dipped 2¢ to $93.11/bbl Feb. 25 on the New York Mercantile Exchange. The May contract slipped 4¢ to $93.53/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 2¢ to $93.11/bbl.

Heating oil for March delivery declined 0.53¢ but closed essentially unchanged at a rounded $3.10/bbl on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 1.85¢ to $3.06/gal.

The March natural gas contract continued climbing, escalating 12.3¢ to $3.41/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., jumped 13.4¢ to $3.42/MMbtu.

In London, the April IPE contract for North Sea Brent rose 34¢ to $114.44/bbl. Gas oil for March regained $1 to $978.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes recouped 26¢ to $111.20/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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