Sam Fletcher
Senior Writer
HOUSTON, Mar. 10 -- Crude prices pulled back some, but not before hitting a record $106.54/bbl in intraday trading Mar. 7 on the New York market, as the US dollar fell and the Department of Labor reported the largest lost of jobs during February in 5 years.
The US dollar dropped to a new low with the value of the euro surpassing $1.54 for the first time. Global demand for energy has slowed but is still climbing despite record high prices. Still, DOL reported the national unemployment rate dipped to 4.8% in February, down 63,000 jobs since January and another indication that the US is slipping into an economic recession (OGJ Online, Mar. 7, 2008).
Analysts in the Houston office of Raymond James & Associates Inc. noted, however, "Natural gas continues to fly in the face of our bearish short-term call as the front-month contract topped $10/Mcf intraday on Mar. 7." They said, "Colder weather has significantly altered our winter-ending storage levels over the last month or so, decreasing the likelihood (or magnitude) of summer-ending gas shut-ins. Bottom line: If winter-ending storage is above 1.3 tcf, we still see a strong likelihood for shut-ins. If it is below 1.2 tcf, then summer will not look as bearish as originally thought. Let's see how the next 4 weeks pan out."
Adam Sieminski, Deutsche Bank's chief energy economist in New York, said, "Natural gas production in the US has been climbing steadily since the start of 2007. But the factors that drove these gains are fading away and the rising costs of alternative fuels appears to be improving gas demand. Consequently, gas storage may end up lower than 'normal' going into next winter."
Meanwhile, Sieminski said, "Price elasticity of demand is finally showing up in the data." He said, "The real price of gasoline in the US is approaching the peak last seen in March 1980. Along with higher natural gas prices, rising electricity bills and soaring expenditures for food, gasoline use in the US is starting to feel the pressure of pinched consumer spending."
Energy prices
The April contract for benchmark US light, sweet crudes dropped 32¢ to $105.15/bbl Mar. 7 on the New York Mercantile Exchange. The May contract lost 39¢ to $104.28/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 32¢ to $105.16/bbl. Heating oil for April delivery declined 2.63¢ to $2.95/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB), however, increased by 4.11¢ to $2.69/gal.
The April natural gas contract advanced by 2.7¢ to $9.77/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 14.5¢ to $9.83/MMbtu.
In London, the April IPE contract for North Sea Brent crude dipped 23¢ to $102.38/bbl. The March contract for gas oil gained $7.50, however, to $972.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 70¢ to $99.16/bbl on Mar. 7. So far this year, OPEC's basket price has averaged $90.44/bbl, up from an average $69.10/bbl for all of 2007.
Contact Sam Fletcher at [email protected].
