Sam Fletcher
Senior Writer
HOUSTON, Jan. 3 -- Energy prices retreated Dec. 30 on the New York market ahead of the long New Year's holiday weekend, pushed down by predictions of warmer US weather in the near term.
Nonetheless, said analysts in the Houston offices of Raymond James & Associates Inc., "It is no exaggeration to say that 2004 was an excellent year for the energy sector's fundamentals—one of the best ever, for the second consecutive year. A robust global economic expansion created a favorable demand environment, while supply of both crude oil and natural gas remained generally tight. This led to a substantial—and, we believe, fully sustainable—upward move in commodity prices."
In a Jan. 3 report, they predicted another banner year for the energy industry in 2005. "We believe that the oil markets have entered a new paradigm where minimal excess [Organization of Petroleum Exporting Countries] production capacity will likely lead to increased volatility, along with generally higher average prices for a lengthy period of time."
During the Dec. 29 trading session, energy prices climbed after the Energy Information Administration reported that US crude stocks and distillate fuel inventories fell by 800,000 bbl each to 295.1 million bbl and 119.1 million bbl, respectively, during the week ended Dec. 24.
"Importantly, the drop in distillate inventories was essentially all attributable to the decline in imports vs. the prior week," said Robert S. Morris, Banc of America Securities LLC, New York, in a Jan. 3 report. "This is important since distillate imports were about one-half of what they typically average for January while total US distillate demand was up 7.1% over the past 4 weeks compared with 1 year ago. Distillate inventories normally build at this time of year and thus the deficit relative to the 10-year average expanded to roughly 9% from 8% below normal the prior week, although the deficit in crude stocks narrowed to 2.1% from 3.1% below the 10-year average." US heating oil inventories remain about 20% below normal levels, Morris said.
Energy prices
The February natural gas contract fell by 25.3¢ to $6.15/MMbtu in the shortened trading session Dec. 30 on the New York Mercantile Exchange, "amid mild weather and weak demand over the long weekend," said analysts at Enerfax Daily. That market was closed Dec. 31 for the US public holiday.
Heating oil for January delivery lost 4.77¢ to $1.23/gal on NYMEX, while gasoline for the same month dipped by 0.44¢ to $1.0887/gal. The February contract for benchmark US light, sweet crudes declined by 19¢ to $43.45/bbl on NYMEX, while the March position retreated by 17¢ to $43.63/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., lost 19¢ to $43.46/bbl.
In London, the February contract for North Sea Brent crude increased by $1.20 to $40.37/bbl Dec. 30 on the International Petroleum Exchange.
The average price for OPEC's basket of seven benchmark crudes increased by 65¢ to $36.19/bbl Dec. 30 and to $36.43/bbl Dec. 31. For the whole week, however, OPEC's basket price averaged $35.72/bbl, down by $2.04 from the previous week.
Contact Sam Fletcher at [email protected]
