Sam Fletcher
Senior Writer
HOUSTON, Jan. 13 -- The crude futures price temporarily topped $65/bbl during trading Jan. 12 on the New York market while the front-month natural gas contract fell to a 5-month low.
Gunmen seized four foreign workers, including one US citizen, from a workboat at a Royal Dutch Shell PLC wellsite off Nigeria Jan. 12. In a separate incident in Nigeria, an explosion ruptured a major pipeline to Shell's Forcados oil export terminal, causing more than 100,000 b/d of crude production to be shut in.
Mild weather
Continued mild weather and reports of lower-than-expected withdrawals from US storage undermined gas prices. The Energy Information Administration reported Jan. 12 the withdrawal of 20 bcf of natural gas from US underground storage during the week ended Jan. 6. That was below the consensus of Wall Street analysts and compared with an injection of 1 bcf the previous week and the withdrawal of 88 bcf during the same period a year ago. US gas storage now stands at 2.6 tcf, which is down by 2 bcf from a year ago but 276 bcf above the 5-year average.
US temperatures last week "were 5% warmer than last year, 21% warmer than the 10-year average, and 2% cooler than the prior week," said Robert S. Morris at Banc of America Securities LLC, New York.
"Winter-to-date temperatures have been 1.6% warmer than the 10-year average," he said. "We believe the lower-than-expected withdrawal more likely reflects the still-strong economic incentive to inject gas into storage at the start of last week combined with minimal heating demand, rather than any significant increase in the level of 'backed-out' demand, especially given the continued drop in natural gas prices."
Gas has been cheaper than distillate (No. 2) fuel oil in key fuel-switching regions for the last 2 weeks, but most users began switching back to gas only this week to first deplete distillate inventories, Morris said. Gas prices are approaching residual fuel oil prices along the Gulf Coast. "We estimate that total fuel-switching capacity in each of the three key fuel-switching regions is 4 bcfd, almost equally split between distillate and residual fuel oil," he said.
Energy prices
The February contract for benchmark US light, sweet crudes escalated to $65.05/bbl during trading Jan. 12, but closed unchanged at $63.94/bbl on the New York Mercantile Exchange. The March contract inched up by 4¢ to $64.49/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was unchanged at $63.95/bbl. Heating oil for February delivery lost 1.58¢ to $1.71/gal on NYMEX. Gasoline for the same month dropped 1.46¢ to $1.72/gal.
The February natural gas contract fell by 29.5¢ to $8.94/MMbtu, the lowest closing for a front-month natural gas contract since Aug. 9, when the September contract closed at $8.65/MMbtu before rising in the next session above $9/MMbtu for the first time since November 2004 to close at $9.07/MMbtu on Aug. 10.
In London, the February contract for North Sea Brent crude gained 45¢ to $62.62/bbl Jan. 12 on the International Petroleum Exchange. Gas oil for January was unchanged at $510.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 74¢ to $57.61/bbl on Jan. 12.
Contact Sam Fletcher at [email protected].
