MARKET WATCH: Surprise withdrawal boosts gas price

A larger-than-expected withdrawal of natural gas from US underground storage boosted the front-month gas contract 3.2% Mar. 7 in the New York futures market while crude bounced back “a healthy 1.1%” from the previous day’s loss.

The rally invigorated all exploration and production corporate stocks, “especially the gassier names,” said analysts in the Houston office of Raymond James & Associates Inc. The SIG Oil Exploration & Production Index surged ahead 3.2% while the Oil Service Index posted a 0.3% increase.

North Sea Brent registered a marginal gain with a disappointing report of Chinese crude imports and the restart of a North Sea pipeline that had been shut-in 5 days. But the US oil market was buoyed by optimistic data for the US economy. The Federal Reserve Bank reported net worth of US families is the highest since late 2007, “driven by rebounding home prices and stock holdings.” Raymond James analysts said, “Equity investors were modestly pleased by the news yesterday, with the Dow Jones Industrial Average edging up for a third straight all-time high.”

The US Department of Labor reported Mar. 8 US employers provided 236,000 new jobs in February, reducing the country’s unemployment to 7.7% from 7.9% in January. The unemployment rate is now at its lowest level in 4 years. But part of that change was because 130,000 US residents stopped looking for work last month and are no longer counted by the government as unemployed. Also, 10,000 government jobs were terminated in February. Government employment has been declining nearly 4 years.

US inventories

The Energy Information Administration reported the withdrawal of 146 bcf of natural gas from US underground storage in the week ended Mar. 1, leaving 2.08 tcf of working gas in storage. That exceed Wall Street’s consensus for a drawdown of 131 bcf of gas. US natural gas stocks are 361 bcf below the comparable period in 2012 but 269 bcf above the 5-year average (OGJ Online, Mar. 7, 2013).

Raymond James analysts said, “Excluding weather-related demand, there was 2.6 bcfd less natural gas added to storage than this time last year.” US gas storage averaged 0.9 bcfd tighter in the 4 weeks ended Mar. 1.

“Colder weather and higher year-over-year withdrawals have led to the recent rebound in gas prices,” said analysts at Raymond James. “With the colder weather leading to freeze-offs this winter and higher demand for gas, the gas markets have begun to tighten, increasing the year-over-year deficit.” Associated gas and Marcellus production will help offset declines in dry-gas production. However, they expect gas prices to remain range bound for some time.

Energy prices

The April and May contract for benchmark US light, sweet crudes rebound $1.13 each to $91.56/bbl and $92.03/bbl, respectively, Mar. 7 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up $1.13 to $91.56/bbl.

Heating oil for April delivery inched up 0.39¢ but closed essentially unchanged at a rounded $2.98/gal on NYMEX. Reformulated stock for oxygenate blending for the same month continued slipping, down 0.14¢, but also was virtually unchanged at a rounded $3.12/gal.

The April natural gas contract jumped 11.2¢ to $3.58/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., fell 2.4¢ to $3.55/MMbtu.

In London, the April IPE contract for North Sea Brent increased 9¢ to $111.15/bbl. Gas oil for March gained $4 to $931/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped 33¢ to $107.31/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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