MARKET WATCH: Oil prices turn around; warmer weather reduces gas futures price

Oil prices turned around Apr. 8, with crude inching up 0.7% to end a 3-day losing streak on the New York market, but the front-month natural gas contract dipped 1% on forecasts of warmer weather in the US Northeast.

“After the rout that ended [last] week, oil markets regained some composure,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Clearly participants are not concerned over weakening demand in the US and remain caught up in the optimism surrounding improved pipeline access of increasing Midwest and Canadian production to coastal refineries.

He said, “Perhaps anticipation of a refinery ramp-up in preparation of the US driving season is also keeping the West Texas Intermediate market buoyed. However, we would not get too carried away with this optimism. While there is room for increased distillate production (stockpiles are currently extremely low), gasoline inventories are largely in line with their seasonal 5-year average.”

North Sea Brent “behaved more in line with market fundamentals,” regaining some of last week’s steep decline. “We feel that from these levels further downside for Brent is considerably compressed and that the potential for some upside is open. We forecast a second quarter average of $110/bbl, although before we move higher we might need to see a catalyst, perhaps in the form of some resurfacing geo-political tensions,” Ground said.

China’s consumer prices increased by a less-than-expected 2.1% in March from the year-ago level. “The number does not bode well for economic growth momentum (a negative for oil), but much more has been read into what this implies for monetary policy. A lower inflation rate has eased concerns that Beijing would tighten monetary conditions, improving sentiment and sending equities higher. We believe when it comes to prices, March is merely a temporary pause and the monetary authorities will be forced to act in due course. Tighter monetary policy in China and its consequences for Chinese economic activity could be a drag on oil prices later this year,” Ground said.

Energy prices

The May contract for benchmark US sweet, light crudes regained 66¢ to $93.36/bbl Apr. 8 on the New York Mercantile Exchange. The June contract recouped 67¢ to $93.68/bbl. On the US spot market, WTI at Cushing, Okla., kept in step with the May futures contract, up 66¢ to $93.36/bbl.

Heating oil for May delivery took back 4.39¢ to $2.75/gal on NYMEX. Reformulated stock for oxygenate blending for the same month recovered 4.57¢ to $2.91/gal.

The May natural gas contract dropped 4.03¢ to $4.08/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., continued climbing, up 15.7¢ to $4.18/MMbtu.

In London, the May IPE contract for Brent regained 54¢ to $104.66/bbl. Gas oil for April increased 75¢ to $880.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 75¢ to $102.35/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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