Sam Fletcher
Senior Writer
HOUSTON, Jan. 7 -- Crude futures prices fell more than $1 Jan. 4 in New York after the Department of Labor reported US unemployment climbed to 5% in December, up from 4.7% in November to the highest level in more than 2 years.
Labor officials also reported US employers created only 18,000 new jobs in December, the smallest increase since August 2003. The consensus among Wall Street analysts was for an increase of 70,000 new employees.
"This report was another signal reaffirming some investors' belief that the US could fall into a recession later this year, which would hurt oil demand," said analysts in the Houston office of Raymond James & Associates Inc. There's a growing expectation among some observers that members of the Organization of Petroleum Exporting Countries will agree at their Feb. 1 meeting in Vienna to increase production and ease price volatility. Others claim that is merely wishful thinking, however, since many OPEC officials continue to claim that markets are well supplied.
Meanwhile, despite losses on "the last day of a short trading week" in the New York market, the front-month contract for benchmark US light, sweet crudes was up $1.91/bbl for the week while North Sea Brent gained $2.91/bbl in the same period, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Heating oil, gasoline, and natural gas also ended the week at higher prices than when it started. As a result, Jakob said, "West Texas Intermediate is higher by $41.60/bbl from last year."
Oil, gas price forecasts
Raymond James analysts are predicting that crude prices will again exceed Wall Street's consensus in 2008. "The global oil markets must push oil prices high enough to slow global oil demand growth in a supply-constrained market," they said. Accordingly, Raymond James raised its forecast of crude prices to an average $90/bbl in 2008, up from a previous estimate of $80/bbl "to reflect a tightening, supply-constrained oil market." Analysts said, "Additionally, we are raising our 2009 forecast from $85/bbl to $100/bbl due to our belief that additional oil supplies will be even harder to find in 2009 and beyond."
Raymond James analysts noted continued strong growth in domestic gas production—"primarily Barnett shale and Rockies driven"—and increased LNG imports should again push US gas storage levels to record highs in 2008. Therefore, they said, "We believe 2008 gas prices will be even weaker than originally anticipated and are revising our 2008 US gas price forecast down from $7/Mcf to an average of $6.50/Mcf for the full year, the lowest since 2004. We are also initiating a 2009 price forecast of $7/Mcf. While US gas prices could remain relatively weak through 2009, the build-out of global gas infrastructure should eventually drive global gas prices closer to BTU parity (6:1 price ratio) over the next 5 years."
Energy prices
The February contract for benchmark US crudes dropped $1.27 to $97.91/bbl Jan. 4 on the New York Mercantile Exchange. The March contract lost $1.25 to $97.69/bbl. On the US spot market, WTI at Cushing, Okla., was down $1.27 to $97.92/bbl. Heating oil for February delivery fell 3.56¢ to $2.68/gal on NYMEX. The February contract for reformulated blend stock for oxygenate blending declined by 3.04¢ to $2.51/gal.
The February natural gas contract escalated by 16.7¢ to $7.84/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., lost 35¢ to $7.53/MMbtu. Weather forecasts calling for another cold snap the middle of this month should support gas prices on NYMEX, analysts said.
In London, the February IPE contract for North Sea Brent crude dropped 81¢ to $96.79/bbl. Gas oil for January fell $14 to $846.50/tonne.
The average price for OPEC's basket of 12 reference crudes declined 27¢ to $93.67/bbl on Jan. 4. So far in the first week of 2008, OPEC's basket price has averaged $93.22/bbl, up from the previous record high average of $69.10/bbl for all of 2007.
Contact Sam Fletcher at [email protected].
