MARKET WATCH: Energy prices decline; WTI-Brent spread widens

Weak economic data, including disappointing housing sales, weighed down crude oil prices July 22 with front-month crude declining 1.1% in the New York market. Forecasts of cooler weather, meanwhile, dropped the front-month natural gas contract 3%.

North Sea Brent increased slightly, however, triggering a dramatic reversal of the narrowing spread between it and West Texas Intermediate. The spread rose to $1.24/bbl July 22 from 2¢/bbl in the previous session, which had been the smallest spread since 2010.

“The ostensible catalyst for yesterday’s drop in the US benchmark was disappointing US economic data flow, most notably existing home sales numbers, which showed a 1.2% month-to-month decline for June—expectations had been for a 1.5% increase,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Adding to the negative sentiment was the downward revision of May’s increase from 4.2% to 3.4%. With a housing market improvement still key to a recovery in the overall economy, these numbers sparked a questioning of the US oil demand optimism that has driven WTI prices so hard over the last month.”

In the equity market, the SIG Oil Exploration & Production Index was down 0.9%, while the Oil Service Index dipped 0.3%.

Energy prices

After registering gains early in the session, the August contract for benchmark US sweet, light crudes fell $1.14 to $106.91/bbl July 22 on the New York Mercantile Exchange. The September contract dropped 93¢ to $106.94/bbl. Subsequent monthly contracts posted sequentially lower prices through the first quarter of 2014. On the US spot market, WTI at Cushing, Okla., trailed the front-month futures contract down $1.14 to $106.91/bbl.

Heating oil for August delivery declined 2.3¢ to $3.07/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 6.83¢ to $3.06/gal.

The August natural gas contract lost 11.2¢ to $3.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., retreated 9.6¢ to $3.70/MMbtu.

In London, the September IPE contract for North Sea Brent was up 8¢ to $108.15/bbl. Gas oil for August dropped $7.25 to $918.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 26¢ to $106.14/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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