Sam Fletcher
Senior Writer
HOUSTON, Nov.8 -- Crude futures prices slipped back Nov. 7 from the previous day's closing, but not before hitting an all-time high of $98.62/bbl in overnight electronic trading.
The reason for the slight roll-back in prices was that the latest weekly drop in US crude inventories was not as bad as some traders had expected. The US Energy Information Administration reported oil inventories retreated 800,000 bbl to 311.9 million bbl in the week ended Nov. 2, instead of the expected drop of 1.6 million bbl. It marked the third consecutive decline in US crude inventories. Gasoline inventories fell by 800,000 bbl to 194.3 million bbl, while distillates increased by 100,000 bbl to 135.4 million bbl.
"The report's volatility was not able to provide the springboard to $100/bbl [crude], said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Moreover, he said, "There will be no more Department of Energy reports to provide the additional kicker until the expiry of the December options" on Nov. 13.
As long as crude futures prices remain above $95/bbl, Jakob said, a price of $100/bbl will remain within reach. "However, the failed DOE support will probably push for more profit taking on any new attempt above $98/bbl," he said.
With oil flirting with triple-digit prices, some lawmakers are asking for the release of US strategic stocks of heating oil in the Northeast market. "But products are not leading the rally, and US stocks of middle distillates if they are still 3.2 million bbl below the high levels of last year are still well above the levels of previous years," Jakob said. "The large year-on-year price increase is making it difficult to know how much of the crude stock deficit is voluntary for end of the year tax purposes," he said.
In a separate report, Paul Horsnell at Barclays Capital Inc. in London noted, "There is really nothing at all that is magical about $100/bbl crude, and the passing of such a milestone does not represent any sign that the drift up will not continue."
In fact, Horsnell reported that energy prices did break one "100" barrier on Nov. 7. "For the first time the average retail price of unleaded gasoline in the UK moved above 100 pence/l. That retail price of £1/l. equates to $7.95/gal [in the] US gallon, or, if you prefer, $333/bbl. UK retail diesel prices are a little higher at $345/bbl," he said. Yet despite high price equivalents, latest UK government figures show demand for gasoline and diesel is up 1.6% from year-ago levels. "For many consumers in the world, the idea of $100/bbl holds relatively little fear, given that they have already been paying more than $100/bbl for an extended period," Horsnell said.
Meanwhile, the US dollar tumbled to new lows Nov. 7 when Cheng Siwei, vice-chairman of the standing committee of the National People's Congress, was reported to favor placing more of China's $1.43 trillion of currency reserves into stronger currencies like euro instead of the dollar.
Raymond James & Associates Inc. analysts in Houston said Nov. 8, "Harsh weather conditions have shut down 220,000 b/d [of crude production] in the North Sea, which should bolster prices today, as crude appears to be looking for anything positive on its march to $100/bbl." ConocoPhillips earlier reported it was evacuating 500 workers from the North Sea Ekofisk oil platforms ahead of forecasts for severe weather in the region.
Energy prices
The December contract for benchmark US sweet, light crudes dipped by 33¢ to close at $96.37/bbl Nov. 8 on the New York Mercantile Exchange. The January contract dropped 20¢ to $95.60/bbl. On the US spot market, however, West Texas Intermediate at Cushing, Okla., escalated $2.39 to $96.38/bbl.Heating oil for December delivery increased 0.97¢ to $2.62/gal on NYMEX. The December contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.56 to $2.44/gal.
The December natural gas contract fell 23.9¢ to $7.62/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 8¢ to $7.28/MMbtu. EIA reported the injection of 36 bcf of natural gas into US underground storage in the week ended Nov. 2. That was above the consensus of Wall Street analysts and compared with the injection of 66 bcf the previous week and a withdrawal of 7 bcf during the same period last year. US gas storage is now at 3.545 tcf, up 99 bcf from year-ago levels and 291 bcf above the 5-year average.
In London, the December IPE contract for North Sea Brent crude slipped 2¢ to $93.24/bbl. Gas oil for November gained $5 to $832/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained $1.58 to $90.71/bbl on Nov. 7.
Contact Sam Fletcher at [email protected].
