Sam Fletcher
Senior Writer
HOUSTON, Feb. 22 -- Energy prices rebounded Feb. 21, wiping out losses from the previous session, as the new front-month April contract for benchmark US light, sweet crudes climbed past $60/bbl in the New York market for the first time in 2007.
Gasoline futures led the trading as continuing refinery and pipeline problems pushed up prices. Teppco Partners LP reported the shutdown of a pipeline, disrupting shipment of 60,000 b/d of refined products from the Gulf Coast to Northeastern markets.
"The momentum on gasoline has gained further strength, and the cracks have all gained," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. "Both crude oil and gasoline are now close to strong resistance levels. The [$57-60/bbl] range on crude oil has not been broken yet but with yesterday's close will remain at a breakout risk on any supportive statistics or continued commodity rally." If market resistance at $61/bbl for crude can be broken, Jakob said, "Given the strength in the overall commodity spectrum we would then expect a rapid flat price advance."
He said gains in the energy market "need to be put in the context of a global commodity rally where corn [prices] closed at 10-year highs" Feb. 21, while gold futures prices are "at the highest level since May-June." Corn is the primary feedstock for the US manufacture of ethanol, a gasoline additive and the primary ingredient in the 85-15% blend of ethanol and gasoline to create the E85 alternative fuel.
"Gasoline inventory levels are expected to be a focal point in the market in coming weeks ahead of the US summer driving season," said analysts in the Houston office of Raymond James & Associates Inc. "Also weighing in on crude prices is the temporary diffusion of tensions over Iran's nuclear program. Yesterday, the United Nations deadline that mandates the halt in nuclear enrichment activity by Iran expired. Several Western nations and Russia have continued to reiterate constructive negotiations with the Islamic republic as the best resolution, thus toning down the rhetoric regarding a possible military confrontation."
However, the BBC network quoted Iranian President Mahmoud Ahmadinejad as saying he wants to achieve nuclear capability as soon as possible, even to the exclusion of everything else.
"We believe that geopolitical factors remain quite volatile across the globe as potential oil supply issues relating to Nigeria, Iran, Iraq, and Venezuela are expected to remain visible for the foreseeable future," Raymond James analysts said.
"While the US has experienced a warm-up in temperatures over the course of this week, the adjacent National Oceanic & Atmospheric Administration 8-14-day outlook indicates that this warm-up may not last, as colder-than-normal weather across some parts of the US Northeast may become more dominant if the pattern develops. Thus, the possibility remains that the first week in March may arrive contrary to current expectations, and prove colder than normal," they said.
US inventories
Meanwhile, the Energy Information Administration reported Feb. 22 that commercial US crude oil inventories jumped by 3.7 million bbl to 327.6 million bbl in the week ended Feb. 16, after dropping a total 1 million bbl over the previous 2 weeks. US gasoline stocks fell by 3.1 million bbl to 222.1 million bbl in the same week. Distillate fuel inventories dropped 5 million bbl to 128.3 million bbl, with heating oil accounting for most of that loss although diesel fuel stocks also declined. Propane and propylene inventories fell by 5.8 million bbl to 34.7 million bbl, EIA said.
Imports of crude into the US increased by 158,000 b/d to 9.7 million b/d in that same period. However, the input of crude into US refineries declined by 416,000 b/d to 14.4 million b/d, with units operating at 85.2% of capacity. Gasoline production dropped to 8.6 million b/d while distillate fuel production decreased to 3.8 million b/d.
EIA also reported the withdrawal of 223 bcf of natural gas from US underground storage in the week ended Feb. 16. That was at the low end of the consensus among Wall Street analysts and compared with withdrawals of 259 bcf the previous week and 123 bcf during the same period a year ago. That leaves a little less than 1.9 tcf of gas in storage, down by 296 bcf from levels at this time a year ago but 182 bcf above the 5-year average. US temperatures during that week were just over 30% colder than last year and the 10-year average, but nearly 8% warmer than the prior week. So far this winter, temperatures have been 1.5% higher than the 10-year average.
Energy prices
The April contract for benchmark US crude gained $1.22 to close at $60.07/bbl Feb. 21 on the New York Mercantile Exchange. The May contract escalated by $1.25 to $60.89/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.45 to $59.53/bbl. Heating oil for March delivery rebounded by 3.66¢ to $1.68/gal on NYMEX. The March contract for reformulated blend stock for oxygenate blending (RBOB) continued its rally, up 5.56¢ to $1.70/gal.
The natural gas contract for March also continued to climb, gaining 6.1¢ to $7.65/MMbtu. On the US spot market, gas at Henry Hub, La., reclaimed 14¢ to $7.50/MMbtu after its sharp drop in the previous session.
In London, the April IPE contract for North Sea Brent crude increased by $1.37 to $59.35/bbl. Gas oil for March was up $15.25 to $517.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes gained 52¢ to $53.85/bbl on Feb. 21.
Contact Sam Fletcher at [email protected].
