Sam Fletcher
Senior Writer
HOUSTON, Nov. 4 -- Energy futures prices rose Wednesday, wiping out the previous day's losses, as it became evident that George W. Bush—not John Kerry—was the victor in the US presidential campaign.
That election "bounced" the oil market "in a way that previous US elections have not," said Paul Horsnell, Barclays Capital Inc., London. Election day erosion of energy prices because of an expected Kerry victory "was somewhat unusual," Horsnell concluded. However, he said, "Our belief is that speculative money has not really needed very firm platforms [from which] to launch waves of selling in recent months. In that sense, the expectation of a Kerry victory was no worse a pretext to sell off than the [recent] quarter-point rise in Chinese interest rates had been."
Speculators seek signs
Speculators have been looking all year for the rise in oil prices to top out. In the interim, there have been three "significant downward moves" in crude futures prices "associated with heavy noncommercial [speculative] selling," Horsnell said. "However, each time it turned out that speculative money jumped too quickly. So the question is whether the current weakness at the front of the curve is really the turning of the wheel or if it is simply the fourth of these premature cycles down. So far, the evidence still suggests that it is the latter."
Energy prices will top out "when enough demand weakness has occurred to restore some modicum of supply flexibility and hence stop the upwards trend," Horsnell said. "However, those fundamental signs will by their nature be observed late and with the usual error and statistical noise."
Meanwhile, he said, "Those wishing to get ahead of the game may have to jump into the void on the basis of what are at best half-signals."
In what was sure to be a signal to some, the Energy Information Administration said Wednesday that US commercial crude inventories jumped by 6.3 million bbl to 289.7 million bbl during the week ended Oct. 29. Traders generally have bid down crude futures prices on the basis of smaller recent increases in crude stocks.
However, EIA officials also reported in US distillate stocks fell for the seventh consecutive week, down by 900,000 bbl to 115.7 million bbl just prior to the start of the winter heating season this week. US gasoline stocks increased by 500,000 bbl to 201.7 million bbl.
The rise in US crude stocks was primarily the result of "a substantial increase in crude oil imports into the Gulf Coast," said EIA officials. Imports of crude into the US as a whole were up by 359,000 b/d to nearly 10.7 million b/d last week. Imports from Iraq were "relatively high," said EIA. Crude input into US refineries averaged nearly 15 million b/d in that period, up 75,000 b/d from the previous week.
"Beyond the crude oil build, there are still few signs of real adjustment in the distillate market," Horsnell said. "We had thought that a seasonal increase in heating oil inventories was possible in each of the past 4 weeks, and each time the situation has tightened further."
Energy prices
The December contract for benchmark US sweet, light crudes jumped by $1.26 to $50.88/bbl Wednesday on the New York Mercantile Exchange, while the January position advanced by $1.23 to $50.82/bbl. On the US spot market, West Texas Intermediate was up by $1.26 to $50.89. Heating oil for December delivery escalated by 3.16¢ to $1.42/gal Wednesday on NYMEX. Gasoline for the same month inched up by 0.4¢ to $1.3277/gal. The December natural gas contract gained 18.5¢ to $8.75/Mcf.
In London, the December contract for North Sea Brent crude was up by $1.01 to $47.56/bbl on the International Petroleum Exchange.
However, the average price for the Organization of Petroleum Exporting Countries fell by 54¢ to $41.44/bbl Wednesday.
Contact Sam Fletcher at [email protected]