Sam Fletcher
Senior Writer
HOUSTON, Apr. 1 -- March trade in the energy futures market went out like a lion with a strong price increase after equity analysts at Goldman Sachs Group Inc., New York, predicted that crude could spike to $105/bbl.
The team headed by analyst Arjun Murti on Mar. 31 hiked its "super spike" estimate to $50-105/bbl, from $50-80/bbl previously, because of continued unexpected strength in world oil demand and economic growth, especially in the US and China. The group also said retail gasoline prices could hit $4/gal during the multi-year "spike" period until high prices force a reduction in oil consumption.
Energy prices
The May contract for benchmark US light, sweet crudes shot up to $56.10/bbl during trading Mar. 31 on the New York Mercantile Exchange before closing at $55.40/bbl, up by $1.41 for the day. The June contract gained $1.63 to $56.42/bbl. On the US spot market, West Texas Intermediate increased by $1.41 to $55.41/bbl. Gasoline for April delivery jumped by 5.88¢ to $1.65/gal on NYMEX. Heating oil for the same month climbed by 5.1¢ to $1.66/gal.
The May natural gas contract escalated by 19.3¢ to $7.76/MMbtu on NYMEX, "on a firm crude oil market and bullish technicals [trades encompassing a wide range of charting techniques involving an index's price, cycles or volatility], as [investment] funds drove the energy complex to new contract highs despite a neutral weekly Energy Information Administration inventory report and fairly mild weather that has slowed demand," said analysts at Enerfax Daily.
"This is one of the occasions where the volatile combination of technicals and funds drive the market well past its normal limits," they said.
EIA reported Mar. 31 that 51 bcf of natural gas was withdrawn from US underground storage during the week ended Mar. 25. That compared with a draw of 89 bcf the previous week and 18 bcf during the same period a year ago. US gas storage now stands at 1.2 tcf, up by 222 bcf from a year ago and 206 bcf above the 5-year average.
The latest withdrawal figure "appears to reflect some incremental backed-out demand vs. the prior week, although the correlation to heating degree days begins to weaken as winter comes to an end and the shoulder period begins," said Robert S. Morris, Banc of America Securities, New York.
"As we near the end of the traditional withdrawal season, injections in early April could get a boost from the strong economic incentive for operators [and] speculators to inject gas into storage, give the current spread between the Henry Hub (physical delivery point for NYMEX futures contract) cash price and the outer-month NYMEX futures contract price, although this will also depend on any potential late season heating demand," Morris said.
In London, the price for the May contract of North Sea Brent crude shot up by $2.20 to $54.29/bbl Mar. 31 on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained $1.43 to $50.23/bbl.
Contact Sam Fletcher at [email protected]
