Most energy futures prices continued to soften on international markets Wednesday, with forecasts of warmer weather for most of the US over the next couple of weeks.
The home heating oil market set the tone for the New York Mercantile Exchange as traders ignored generally bearish US inventory numbers published late Tuesday by the American Petroleum Institute. API reported the decline of 826,000 bbl of home heating oil stocks during the previous week, but that was cheered by the market as less than previously expected.
Home heating oil for February delivery plunged 4� to 82.22�/gal on the NYMEX, while unleaded gasoline for the same month lost 0.3� to 87.3�/gal.
That helped pull down oil futures. The March contract for benchmark US light, sweet crudes lost 52� to 29.05/bbl, and the April contract was down 48� to $28.31/bbl Wednesday on the NYMEX. In after-hours electronic trading, the March crude contract rebounded to $29.16/bbl while the April contract was untraded.
The February natural gas contract bucked that trend, however, advancing 16.9� to $7.12/Mcf on technical trading. Declines in gas futures prices during recent sessions produced �an oversold state� that opened up buying opportunities, observers reported.
The American Gas Association earlier reported that 90 bcf of gas was withdrawn from US underground storage last week, compared with withdrawals of 195 bcf during the same period a year ago and 92 bcf in 1999.
Based on those figures, �it now appears that more fuel switching and/or plant closures may have occurred over the past 2 weeks than originally anticipated,� said Robert Morris, energy analyst for Salomon Smith Barney Inc. in a weekly report.
Some 8 bcfd of gas demand apparently have been backed out of the market through fuel switching or plant closures, instead of the 3 bcfd earlier calculated, he said.
�However, the relative pricing of natural gas and distillates has nearly returned to relative parity, perhaps precluding further switching away from natural gas,� Morris said.
Meanwhile, meteorologists reported the jet stream across the continental US is in a zonal flow that should limit movement of any major arctic air masses into the country for the next few weeks. That means temperatures should remain at normal or higher levels into early February.
In London, the March contract for North Sea Brent crude closed at $26.26/bbl Wednesday, down 41� for the day, after temporarily breaking through the $26 support level to trade as low as $25.33/bbl on the International Petroleum Exchange.
Brokers blamed that decline on a general lack of buying interest rather than any substantial new bearish factors. However, they said prices still have not fallen significantly from recent higher levels.
The February natural gas contract lost 1� Wednesday to the equivalent of $4.06/Mcf on the IPE.
The average price for the Organization of Petroleum Exporting Countries� basket of seven crudes gained 6� to $25.39/bbl on Wednesday.
