Sam Fletcher
Senior Writer
HOUSTON, Nov. 29 -- The expiring December natural gas contract shot up Wednesday, pulling up crude prices in its wake, after the Energy Information Administration reported an unexpectedly large withdrawal of gas from US storage during the week ended Nov.19.
EIA reported Wednesday, ahead of the US Thanksgiving holiday, that 49 bcf of natural gas was withdrawn from US storage during the previous week. That left 3.27 tcf of gas in US storage. The December natural gas contract shot up by $1.18 to $7.98/Mcf during Wednesday's trading session on the New York Mercantile Exchange, "despite a sharply discounted cash (US spot) market," said analysts Monday at Enerfax Daily. NYMEX was closed Thursday and Friday for the Thanksgiving holiday.
The January contract for benchmark US light, sweet crudes gained 50¢ to $49.44/bbl Wednesday. The February contract was up by 33¢ to $49.45/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased by 52¢ to $49.27/bbl Wednesday. Heating oil for December delivery inched up by 0.58¢ to $1.4516/gal on NYMEX. However, gasoline for the same month fell by 1.06¢ to $1.30/gal.
In London, the January contract for North Sea Brent crude gained 27¢ to $44.82/bbl Wednesday on the International Petroleum Exchange. That same contract lost 16¢ Thursday and another 9¢ on Friday to settle at $44.57/bbl at the end of last week.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 26¢ to $38.95/bbl Wednesday and by another 11¢ to $39.06/bbl Thursday. However, on Friday it was down by 17¢ to $38.89/bbl.
For the whole week, OPEC's average basket price was up by $1.68 to $38.57/bbl. So far this year, OPEC's basket price has averaged $36.03/bbl, up from an average $28.10/bbl for all of 2003.
This week will mark "the first anniversary of the last time that the value of the OPEC basket of crude oils was within the [group's] $22-28/bbl target range. On Dec. 1, 2003, the value of the basket was $27.92/bbl, but since then it has stayed above $28[/bbl]," said Paul Horsnell, Barclays Capital Inc., London.
"However, this dollar value pattern disguises the presence of some powerful exchange rate effects," said Horsnell in a Nov. 24 report. "At the start of 2003, the dollar and euro values of the OPEC basket were very similar, with the dollar at near parity with the euro." As of Nov. 23, he said, the value of the basket was $38.69/bbl, but due to the weakness of the dollar, it was just 29.56 euros/bbl.
"Indeed, at points over the past week, the value fell below 28 euros/bbl, representing a fall in price relative to the start of 2003," Horsnell said.
"One of the key issues for next year will be how the dynamics of the dollar impact on policy-making within the oil industry," he said. "Should dollar-bears be correct, then exchange rate issues are likely to play a major part in determining target dollar values."
Contact Sam Fletcher at [email protected]
