MARKET WATCH: US crude futures slip lower; gas continues to fall

US benchmark crude slipped to a 3-week low July 29, and front-month natural gas dropped 3% in the New York market with cooler weather forecast for the Midwest and Northeast.

In the US equity market, stocks pulled back broadly in the first trading session of what analysts in the Houston office of Raymond James & Associates Inc. described as “the week of the central bankers.” Executives of the US Federal Reserve Bank opened a 2-day meeting July 30, while the European Central Bank and the Bank of England are separately scheduled of policy meetings this week, increasing the possibility of major developments in markets.

“Although all three banks will likely just reaffirm their determination to keep a lid on interest rates for a long time, that won't stop speculators from doing what they do best,” Raymond James analysts said. Following the weakness in stocks and commodities, the SIG Oil Exploration & Production Index and the Oil Service Index slipped 1% each. Oil and gas prices were down in early trading July 30.

Investors are hoping Federal Reserve Chairman Ben Bernanke will reveal in post-meeting comments July 31 more information as to when the Fed will begin curbing its $85 billion bond purchases that have kept long-term borrowing rates low. A Reuter’s poll of economists indicated September is the most likely time for the bank to begin tapering bond purchases.

There also is speculation Bernanke may indicate when the Fed might raise its short-term interest rate, which has remained near zero since 2008. He previously said the rate will remain unchanged as long as US unemployment is above 6.5% and inflation is below 2.5%. Unemployment currently is 7.6% with inflation at 1%.

In the UK, there are expectations new Bank of England Governor Mark Carney will discuss the bank’s monetary policy and its effect on the British pound.

The European Central Bank’s monthly policy meeting is scheduled Aug. 1. No major monetary changes are expected from that meeting, but some hope bank officials may move to make their proceedings more transparent. The ECB is the only major central bank that does not release publicly the minutes of policy discussions.

Energy prices

The September contract for benchmark US sweet, light crudes slipped 15¢ to $104.55/bbl July 29 on the New York Mercantile Exchange. The October contract dipped 11¢ to $103.90/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., remained in step with the front-month futures contract, down 15¢ to $104.55/bbl.

Heating oil for August delivery inched up 0.61¢ to $3.02/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, declined $3.19¢ to $3.01/gal, wiping out its gain from the previous session.

The August natural gas contract dropped 9.6¢ to $3.46/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 12¢ to $3.47/MMbtu.

In London, the September IPE contract for North Sea Brent recovered 28¢ to $107.45/bbl. Gas oil for August took back the $3.25 lost in the previous session, closing at $913.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 11¢ to $105.21/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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