Sam Fletcher
Senior Writer
HOUSTON, Jan. 31 -- Crude prices kept climbing for a fifth consecutive session as the Federal Open Market Committee cut its benchmark lending rate by half a percentage point to 3% Jan. 30.
That move was generally expected and had already been figured into crude market prices. Instead, said Olivier Jakob at Petromatrix, Zug, Switzerland, "The surprises this week came from better-than-expected [US reports] of durable goods orders and worse-than-expected fourth quarter gross domestic product growth. It will be left now to the January employment report [due for release Feb. 1] to be the directional judge" of market movements.
The Fed has cut lending rates a total of 1.25 percentage points over the last 8 days, a move almost unparalleled in its history. The Fed also cut its discount rate on direct loans to banks by a half-point to 3.5%. FOMC is next scheduled to meet Mar. 18.
The Organization of Petroleum Exporting Countries meets Feb. 1 in Vienna. Most observers expect that group to make no change in its official production quotas, and that too has already been priced into oil markets. OPEC Pres. Chakib Khelil, who also is Algeria's oil minister, said it would be difficult for that group to make any production changes at this time because of economic uncertainties.
Meanwhile, the US Energy Information Administration issued a bearish report showing that US crude inventories rose during the week ended Jan. 25, its third consecutive increase (OGJ Online, Jan. 30, 2008). "Due to the current weak refinery margin environment, look for refineries to continue to reduce utilization and US crude inventories to build in the coming weeks," said analysts in the Houston office of Raymond James & Associates Inc.
Jakob agreed in a separate report that said, "The rebuild of US crude stocks should continue, with refineries shutting down more capacity either for maintenance or due to negative economics."
Energy prices
The March contract for benchmark US sweet, light crudes increased 69¢ to $92.33/bbl Jan. 30 on the New York Mercantile Exchange. The April contract advanced 74¢ to $92.16/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 69¢ to $92.34/bbl. Heating oil for February rose 0.75¢ to $2.55/gal on NYMEX. The February contract for reformulated blend stock for oxygenate blending inched up 0.45¢ to $2.33/gal.
The March natural gas contract escalated by 10.2¢ to $8.05/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 10¢ to $8.19/MMbtu.
In London, the March IPE contract for North Sea Brent crude increased 53¢ to $92.53/bbl. Gas oil for February slipped by 25¢ to $810.25/tonne.
The average price for OPEC's basket of 12 reference crudes gained 38¢ to $88.77/bbl on Jan. 30.
Contact Sam Fletcher at [email protected].
