Sam Fletcher
Senior Writer
HOUSTON, Jan. 27 -- Energy prices fell Monday with forecasts of temperature increases, even as storms continued to pummel the eastern US with snow, sleet, and freezing rain.
Highways were glazed over as far south as Georgia, and weather was blamed for at least 38 deaths, most of them traffic related, on Sunday and Monday.
Natural gas
Despite the current wave of cold weather, the February natural gas contract plunged by 33.2¢ to $5.73/Mcf Monday on the New York Mercantile Exchange, undermined by "a softer [spot] cash market and more moderate Northeast and Midwest weather forecasts for later this week," said analysts Tuesday at Enerfax Daily. The February gas contract is scheduled to expire Wednesday.
"Although forecasters continue to call for mostly below-normal temperatures in New York and Chicago this week, New York is expected to moderate to near-normal later in the week and early next week," analysts reported.
The March contract for benchmark US sweet, light crudes lost 47¢ to $34.47/bbl Monday on NYMEX, while the April position retreated by 39¢ to $33.64/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., dropped by 55¢ to $34.48/bbl.
Heating oil for February delivery fell by 3.22¢ to 99.32¢/gal Monday. Gasoline for the same month declined by 3.4¢ to $1.0025/bbl.
Tight gasoline market
In a report issued Tuesday, Michael Rothman and Steven A. Pfeifer, first vice-presidents and senior analysts at Merrill Lynch Global Securities Research & Economics Group, New York, noted the "evident tightness" of reformulated gasoline (RFG), which "accounts for roughly 30% of total US gasoline use and, importantly, most of the fuel consumed in major city centers (including the New York tri-state area)."
"Stocks of RFG currently sit almost 34% below normal and just a million bbl from their 10-year low, which is manifesting in a widening price spread between unleaded and crude," they said.
"The inventory situation is typically less of a factor during winter because manufacturing standards are less strict than [in] the summer season," they reported. However, the analysts said the US gasoline market in 2004 faces the mandated elimination of methyl tertiary butyl ether (MTBE), a high-octane blending component, from the large California, New York, and Connecticut markets.
Also, they noted a new limit on gasoline's allowable sulfur-content is effective this year and will be reduced further in 2006. That, they said, should "negatively impact gasoline yields" as a percentage of crude runs. As a result, they said, "Recent data showing crude run rates to be much higher than year-ago stand in sharp contrast to RFG production that's running much lower."
Further, the analysts said, "We expect the sulfur limit to reduce the availability of gasoline imports, as non-US refining capacity tends to be short on desulfurization. Imports have played a growing role in meeting domestic needs since 2000 when gasoline standards changed to stricter limits."
Meanwhile, Merrill Lynch expects US gasoline demand to grow by 1.5-2%, "bolstered by the continuing strong appetite for less fuel-efficient "'light trucks' (also known as sports utility vehicles)." That should produce "higher than historically normal [gasoline] crack spreads, the key determinant of refining profit margins in the US," the analysts said.
Other energy prices
In London, the March contract for North Sea Brent oil lost 51¢ to $30.45/bbl Monday on the International Petroleum Exchange. Gas oil for February delivery lost $9.50 to $272.50/tonne. The February natural gas contract plummeted by 66.7¢ to the equivalent of $4.80/Mcf Monday on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dropped by 57¢ to $30.17/bbl Monday.
Contact Sam Fletcher at [email protected]
