Sam Fletcher
Senior Writer
HOUSTON, Mar. 28 -- The near-month benchmark US crude contract jumped above $107/bbl Mar. 27 in the New York market following reports of the bombing of one of the primary export oil pipelines in southern Iraq.
But oil prices fell back below that level in early trading Mar. 28 when Iraq officials reported that the transport of oil through that pipeline system was back to normal. The sabotaged pipeline moves oil from the Zubair field to the Al-Faw storage facility for export through the Basra terminal (OGJ Online, Mar. 28, 2008). The amount of oil disrupted by the sabotage was earlier estimated at 130,000 b/d.
Oil is "at a turning point" for a $10/bbl move in either direction, depending on the strength or weakness of the US dollar, said Olivier Jakob at Petromatrix, Zug, Switzerland. "The dollar index is now back to testing the record-low support, and it will remain the trigger for West Texas Intermediate to test the record high resistance. If the euro manages to climb towards $1.60, WTI will break $110/bbl towards $115/bbl, and if the dollar manages to rebound like in mid-March, WTI will break $100/bbl towards $95/bbl."
He said, "The gasoline crack is falling back to counterseasonal values and will remain under pressure in any dollar rally. Heating oil was the complex leader and products will remain volatile in front of [the Mar. 31] expiry."
Meanwhile, Paul Sankey, senior energy analyst for Deutsche Bank, New York, said it is not the speculators that are pushing up oil prices as many claim. "Oil supply is weak and global demand is strong, so the oil price is high," he said. "Supply spare capacity is terribly weak, almost scarily so." Sankey noted, "Spot delivery global gas (LNG) is trading at $20/MMbtu, or $200/bbl of oil equivalent. There are no 'speculators' in that market."
Adam Sieminski, global energy economist for Deutsche Bank, on Mar. 28 lifted average price estimates to $95.75/bbl for crude and $9.25/MMbtu for natural gas in 2008 and to $102.50/bbl and $10.75/MMbtu in 2009. "These 2009 forecasts still leave upside room to prior peaks in both oil and gas when adjusted for inflation and income growth," he said.
Sieminski said, "World oil markets are starting to loosen up 'fundamentally,' but the degree of tempering does not appear to be acute and corrective forces are taking time." His latest forecast for the global economy puts world gross domestic product growth for 2008 at 3.5%—"significantly less than the 4.6% forecast in December 2007, but not a recession," he said.
"Higher prices and slower GDP are starting to erode demand; nevertheless, oil demand is expected to rise by at least 1 million b/d in 2008 and by even more than this in 2009," said Sieminski. "Current non-OPEC supply growth forecasts look for a rise of 1 million b/d for 2008 and 2009. This suggests that the 'call on OPEC' for 2008 and 2009 will not be under much, if any, downward pressure. Markets remain tight while geopolitical forces and asset allocation factors provide support."
Analysts for Raymond James & Associates Inc. in Houston, said, "Russia's oil output may fall this year for the first time in a decade as rising costs and harder-to-reach fields have led to national production reaching a plateau and a decline in onshore production. In line with our bullish oil call, this data point (we had been conversationally modeling a 1.4% increase in Russian production) stands to further tighten the supply/demand fundamentals for oil."
Energy prices
The May contract for benchmark US light, sweet crudes traded in a $3/bbl range before closing at $107.58/bbl, up $1.68 Mar. 27 on the New York Mercantile Exchange. The June contract advanced by $1.45 to $106.59/bbl. On the US spot market, WTI was up $1.69 to $107.59/bbl. Heating oil for April hit a record intraday high just over $3.16/gal prior to a record high closing of $3.15/gal, up 10.45¢ for the day on NYMEX, lifted by a strong global market for distillates and lingering cold. However, the April contract for reformulated blend stock for oxygenate blending (RBOB) dropped 2.66¢ to $2.72/gal, amid expectations of a sluggish driving season if high pump prices prevail.
The April natural gas contract inched up 0.6¢ to $9.58/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 4¢ to $9.28/MMbtu.
In London, the May IPE contract for North Sea Brent crude gained $1.01 to $105/bbl. The April gas oil contract jumped by $15.50 to $962.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes increased by $1.94 to $100.36/bbl on Mar. 27.
Contact Sam Fletcher at [email protected].
