The front-month crude contract recovered from earlier intraday losses to finish up 0.3% in the New York futures market in the trading turmoil following the Cypriot government’s decision to seize 10% of depositors’ bank savings in a bailout of its sovereign debt.
European Union finance ministers want to force Cyprus depositors to participate in a bailout of that country through a tax on savings accounts. But following public outcry, the Cypriot government called for a 1-day delay in a parliamentary vote on the plan and introduced an amended bill that would shield accounts of €20,000 or less.
“After a torrid start to the week (in response to the Cyprus levy and the consequent risk-off sentiment), oil markets managed to gain some composure later on in the day,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. However, North Sea Brent was down moderately, narrowing the price spread vs. West Texas Intermediate to $15.77/bbl—its lowest level since Jan. 17, Ground said.
“There doesn't appear to have been any specific factor [in the intraday rebound in crude] other than some opportunistic buying at lower prices amid an apparent confidence in US demand (given the stronger moves in WTI),” Ground reported. However, he reiterated, “We are still cautious about getting too excited about US crude oil demand growth and feel that the market might be disappointed.”
In Houston, analysts with Raymond James & Associates Inc. said, “The broader markets fell (Standard & Poor’s 500 Index down 0.6%) as investors feared the Cyprus situation would not be unique and would reignite the Euro-zone crisis.” The Oil Service Index and the SIG Oil Exploration & Production Index decreased 2.4% and 0.5%, respectively. However, natural gas traded 0.3% higher on colder weather forecasts. Crude, gas, and the broader market all were higher in early trading Mar. 19.
The April and May contracts for benchmark US sweet, light crudes increased 29¢ each to $93.74/bbl and $94.11/bbl, respectively, Mar. 18 on the New York Mercantile Exchange.
On the US spot market, WTI at Cushing, Okla., matched the front-month futures closing price of $93.74/bbl. Heating oil for April delivery declined 1.23¢ to $2.93/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 3.49¢ to $3.13/gal.
The April natural gas contract gained 1¢ to $3.88/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 9.5¢ to $3.98/MMbtu.
In London, the May IPE contract for Brent fell 31¢ to $109.51/bbl. Gas oil for April lost $5 to $913/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was down 26¢ to $$106.36/bbl.
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