Sam Fletcher
Senior Writer
HOUSTON, Mar. 13 -- Crude prices continued soaring to new heights of $110/bbl Mar. 12, with traders shrugging off bearish reports of high inventories as the US dollar fell to historic lows against the euro.
The euro passed the $1.55 threshold for the first time in a daylong drive as the European Central Bank refused to cut interest rates as has the Federal Reserve System. The dollar fell to a 12-year low against the Japanese yen and a historic low against the Swiss franc. The falling value of the US dollar has prompted investors—and speculators—to put their money into commodities like oil and gold futures, which for the first time hit $1,000/oz.
"The current dynamics of the oil market clearly show that the responsibility for crude oil above $110/bbl lies more with [Jean-Claude Trichet, president of the European Central Bank,] than with [Ali I. Al-Naimi, Saudi Arabia's oil minister]," said Olivier Jakob at Petromatrix, Zug, Switzerland. "The dollar index was down 1%, crude oil had to be up 1%. The current dollar to oil trade is simple, and the paradox remains that the European Central Bank is the creator of the same inflation it is trying to combat. The dollar will remain the dominant factor until the US Federal Reserve board's meeting Mar. 18, but oil will also have to balance with equities under the pressure of more credit hedge funds going belly-up," Jakob said.
The Energy Information Administration said commercial US crude inventories jumped 6.2 million bbl to 311.6 million bbl in the week ended Mar. 7, far surpassing Wall Street expectations of a 1.6 million bbl build. Gasoline inventories increased by 1.7 million bbl to 236 million bbl during the same week, vs. a Wall Street consensus of a 100,000 bbl increase. Distillate fuel stocks dropped 1.2 million bbl to 116.4 million bbl vs. an expected decline of 2 million bbl (OGJ Online, Mar. 12, 2008).
In response to that report, Jakob noted, "US gasoline stocks are at a 15-year high, demand is down 950,000 b/d from last year (based on a 4-week average) and crude imports are higher by 520,000 b/d."
In a separate report, Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, said, "Although we expect seasonally rising demand and lower supply to reduce inventories in the coming weeks, gasoline is likely to remain a weak product for refiners well in the second quarter."
Energy prices
The April contract for benchmark US sweet, light crudes at first retreated following the Mar. 12 EIA report but then climbed to a record high as $110.20/bbl in intraday trading as the dollar market fell. It closed at a record $109.92/bbl, up $1.17 for the day on the New York Mercantile Exchange. The May contract advanced $1.05 to $108.57/bbl. On the US spot market, West Texas Intermediate was up $1.17 to $109.93/bbl. Heating oil for April delivery increased 2.87¢ to $3.02/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.25¢ to remain virtually unchanged at a closing average of $2.73/gal.
The April natural gas contract increased 1.1¢ to $10.01/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 12¢ to $9.70/MMbtu.
In London, the April IPE contract for North Sea Brent crude escalated $1.02 to $106.27/bbl, also a record. The March gas oil contract was unchanged at $979.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes climbed 81¢ to $101.38/bbl on Mar. 12.
Contact Sam Fletcher at [email protected].
