Sam Fletcher
Senior Writer
HOUSTON, Mar. 7 -- Crude prices soared to record heights again Mar. 6 driven not by the flow of oil but by the flow of money from pension and hedge funds and speculators into energy commodities.
The US dollar dropped to a new low Mar. 7 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, the US Department of Labor reported Mar. 7 that 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. That could send oil prices spiraling down again.
Olivier Jakob at Petromatrix, Zug, Switzerland, said, "The weak dollar should make for a soft landing of demand erosion in non-dollar countries rather than oil demand falling off of a cliff like in the US (down 1.1 million b/d on the 4-week average), but it will not create a demand booster. With record high crude oil and record high gas oil crack as well as high diesel premium, driving in Europe is not getting cheaper."
With the end of this year's first quarter just 3 weeks away, Jakob said, "We would expect some profit taking to take place for the end of the quarter and the expected weak-dollar buying reaction to provide the funds with that opportunity."
Meanwhile, the South American crisis over the Colombian military's incursion into Ecuador to kill a leader of the Revolutionary Armed Forces of Colombia (FARC) escalated Mar. 6 when Nicaragua broke off relations with Colombia over that attack. Nicaraguan President Daniel Ortega is an ally of Ecuadorean President Rafael Correa and of Venezuelan President Hugo Chavez. Chavez earlier threatened that Venezuela might join Ecuador in a war with Colombia (OGJ Online, Mar. 5, 2008).
However, Chavez called for a cooling of tensions at the Mar. 7 opening of a meeting of South American presidents in Santo Domingo, Dominican Republic. Ecuador and Venezuela have sent troops to their borders with Colombia, but Colombian President Alvaro Uribe has not made a similar military buildup.
Energy prices
The April contract for benchmark US light, sweet crudes hit a new intraday high of $105.97/bbl Mar. 6 before closing at a record $105.47/bbl, up 95¢ for the day on the New York Mercantile Exchange. The May contract climbed 98¢ to $104.67/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 96¢ to $105.48/bbl. Heating oil for April delivery gained 3.02¢ to $2.97/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB) increased 1.11¢ to $2.65/gal.
The April natural gas contract inched up 0.1¢ to remain virtually unchanged at $9.74/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 27¢ to $9.68/MMbtu.
In London, the April IPE contract for North Sea Brent gained 97¢ to $102.61/bbl. The March contract for gas oil increased by $7.50 to $965/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 benchmark crudes jumped by $2.51 to $98.46/bbl on Mar. 6.
Contact Sam Fletcher at [email protected].
