MARKET WATCH: Pressure ‘building’ on oil prices following rally

The pressure on oil prices—which were experiencing somewhat of a rally early in this year’s second quarter that accelerated in the third quarter—has started to build, according to an Oct. 4 commodity research note from ABN-AMRO Bank NV. This rally, the bank said, actually “came to a halt at the end of September.”

It said, “The three most important reasons for the stagnation of the rally were: market anticipation of the [US Federal Reserve Bank] tapering its bond purchases, Iran trying to improve relations with the US, and the compromise between Russian and the US regarding the Syria conflict.”

The bank noted, “As the market was anticipating a start of the Fed tapering its bond purchases ahead of the meeting, oil prices were already under pressure. Although the fact that the Fed decided not to start tapering took markets by surprise, a strong rise in oil prices did not occur.”

It continued, “Our economists now expect the Fed to start scaling back its asset purchase programs at its December meeting. In our view, the actual announcement could lead to a stronger US dollar, higher yields, and therefore lower oil prices into 2014. The partial shutdown of the US government, due to the failed budget talks, also increases the pressure on oil prices.”

Energy prices

The NYMEX November crude contract gained 53¢ on Oct. 4 to settle at $103.84/bbl. The December contract increased by 56¢ to $103.53/bbl.

Heating oil for November delivery edged down less than a cent to a rounded $3/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for November dropped 3.2¢ to a rounded $2.61/gal.

The January natural gas contract increased 1.3¢ to a rounded $3.79/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La., was a rounded $3.55/MMbtu, down 2.8¢.

In London, the November IPE contract for North Sea Brent crude rose 46¢, settling at $109.46/bbl. The October contract for gas oil fell $4 to $922.50/tonne while the November contract declined by $3.25 to $921.50/tonne.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes climbed 15¢ on Oct. 4 to $106.94/bbl.

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