Sam Fletcher
Senior Writer
HOUSTON, Mar. 7 -- Gasoline and crude prices continued to climb Mar. 4, pushing toward new highs. Forecasts of cold weather also pushed up natural gas futures prices, but heating oil continued to slip.
Heating oil prices led the rise in crude prices during the first half of last week amid market concerns that, if extended, colder-than-normal weather in the Northeast US might deplete heating oil stocks. However, by the latter part of last week, the market was being led by gasoline prices, which set new highs in three consecutive trading sessions Mar. 2-4 on the New York Mercantile Exchange.
Meanwhile, unlike some investment bankers who recently lowered their forecasts for composite spot natural gas prices while raising crude price forecasts, UBS Securities LLC in New York on Mar. 7 increased its spot price estimates for both gas and crude. "We are raising our '05 composite spot natural gas price forecast to $5.75/MMbtu from $5.50; our '06 forecast to $5.50 from $5; and our long-term equilibrium or 'normalized' price to $5.25 from $4.75," its analysts reported. UBS also raised its spot oil price forecast for West Texas Intermediate to $44/bbl from $34 in 2005; $41/bbl from $30 in 2006; and to $35/bbl from $25 for long-term equilibrium or "normalized" price.
The key drivers for the UBS hike in natural gas prices, said analysts, include flat-to-declining US deliverability, strong crude pricing, continued growth in weather-normalized demand, and rising cost structures. The reasons for the crude price hikes included strong world demand for crude; slowing production-growth outside of the Organization of Petroleum Exporting Countries; rising cost structures; and higher targeted OPEC pricing, they said.
The April contract for benchmark US light, sweet crudes gained 21¢ to $53.78/bbl Mar. 4 on NYMEX, while the May contract was up by 12¢ to $54.28/bbl. On the US spot market, WTI at Cushing, Okla., increased by 21¢ to $53.79/bbl, "closing out the week at a 4-month high and only $1.39/bbl shy of its all-time high set last October," said analysts at Banc of America Securities, New York.
Gasoline for April delivery inched up by 0.14¢ to $1.5089/gal on NYMEX. However, heating oil for the same month dipped by 0.74¢ to $1.48/gal. The April natural gas contract jumped by 8.7¢ to $6.74/MMbtu, "despite some early selling on a softer cash [spot] market, lifted by fairly cold Northeast and Midwest weather forecasts for the next couple of weeks," said analysts at Enerfax Daily. "While the recent cold has not been as severe as in January, it should help use some of the surplus inventory that has weighed on prices," they said.
"After declining for four straight weeks on an outlook for plentiful natural gas storage levels at the end of this month, composite spot natural gas prices have now risen over the past 2 weeks, although remaining relatively weak compared with oil prices," said Banc of America Securities analysts.
In London, the April contract for North Sea Brent crude lost 15¢ to $51.80/bbl on the International Petroleum Exchange.
The average price for OPEC's basket of seven benchmark crudes inched up by 1¢ to $48.37/bbl on Mar. 4. For all of last week, however, OPEC's basket price averaged $46.59/bbl, up by $2.64 from the previous week.
So far this year, OPEC's basket price has averaged $41.58/bbl, up from an average price of $36.05 for all of 2004.
Contact Sam Fletcher at [email protected]
