Sam Fletcher
Senior Writer
HOUSTON, Apr. 15 -- Crude prices climbed to new highs in the New York and London markets and for the Organization of Petroleum Exporting Countries Apr. 14 after a leak closed for the weekend Shell Oil Co.'s 1.2 million b/d Capline oil pipeline from Louisiana to a pipeline hub in Illinois.
Shell subsequently reported the pipeline system was reopened and should be back to normal operations within days. The leak spilled 10 gal of oil that was contained and is being cleaned up, officials said.
Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. said oil surged to a new intraday high of $113.13/bbl in premarket trading Apr. 15 in New York "on news that Mexico, the third-largest exporter of crude to the US, has shut its fourth export terminal due to bad weather." The previous intraday high in that market was $112.21/bbl on Apr. 9.
"West Texas Intermediate needed to make a new high to attract momentum traders, and it managed to do that in the final quarter of the [Apr. 14] trading session," said Olivier Jakob at Petromatrix, Zug, Switzerland. "While crude oil was recently supported by the weak dollar and strong middle distillates, yesterday it decoupled from these main support items and rallied on its own weight and money flow momentum. The euro stays on its support trending line but is still failing to break the $1.59 level. At the close of yesterday, WTI was priced $2.90/bbl over our dollar index correlation. As long as the euro is not able to break the $1.59 resistance towards $1.60, the weak dollar can not be taken as a justification for WTI to break $112/bbl towards $115/bbl."
Jakob noted heating oil futures were "under the influence of a bearish reversal pattern" last week "and have gone from being the strong to the weak link of the oil complex." That "together with a further weakening of the [reformulated blend stock for oxygenate blending] RBOB crack makes for a weaker 3-2-1 futures refinery margin," he said.
OPEC report
In its monthly market report, OPEC said Apr. 15 the weakness of the dollar against other major currencies has increased investment in the commodities market, pushing crude prices to record levels. The price of the front-month crude contract in the New York market has increased by $15.78/bbl, or 16.4%, in 2008. "Concern that economic growth could dent oil demand kept prices volatile," said OPEC officials. "Geopolitical tensions in the Middle East added to market bullishness while weak economic indicators revived fears over a recession in the US, capping further price developments," OPEC reported.
The price of OPEC's basket of 13 reference crudes averaged $99.03/bbl in March, up $8.39, more than 9%, from February. The basket rose in the first half of April to a record high of $104.02/bbl on Apr. 14, up 35¢ for the day.
In its latest report, OPEC lowered its forecast for world economic growth is forecast to 3.9% in 2008, down 0.1% from its March outlook. "The US appears very likely to have fallen into recession in the first half of the year due to continued weakness in labor markets. Payrolls have declined for the third month, consumer confidence has fallen sharply, and the contraction continues in the housing sector," it said.
Among member countries of the Organization for Economic Cooperation and Development, especially the US, demand for transport fuel has failed to grow as expected because of slow economic activities and higher oil prices, OPEC noted. Yet world oil demand has been showing healthy growth because of non-OECD demand. OPEC expects world oil demand to grow 1.2 million b/d in 2008 to 87 million b/d, basically unchanged from its March prediction.
The group estimated demand for OPEC crude averaged 31.9 million b/d in 2007, up 300,000 b/d from 2006 levels, but should decline by 200,000 b/d to 31.8 million b/d in 2008. Growth in OPEC production of NGLs and nonconventional oils and was left unchanged at 340,000 b/d for 2007 and 54 0,000 b/d for 2008. In March, OPEC produced 32 million b/d of crude, a decline of 141,000 b/d in February.
Non-OPEC crude supplies were estimated to have increased 600,000 b/d to 49.4 million b/d in 2007 and are expected to increase 800,000 b/d to 50.3 million b/d in 2008.
Energy prices
The May contract for benchmark US light, sweet crudes escalated by $1.62 to a new closing high of $111.76/bbl Apr. 14 on the New York Mercantile Exchange. The June contract gained $1.46 to $111.17/bbl. Heating oil for May inched up 0.54¢ but the closing price was virtually unchanged at $3.20/gal. RBOB for the same month increased 1.45¢ to $2.82/gal.
The May natural gas contract climbed 15.2¢ to $10.05/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 4¢ to $10.01/MMbtu.
In London, the May IPE contract for North Sea Brent crude hit an intraday record of $110.01/bbl before closing at a new high of $109.84/bbl, up $1.09 for the day. The May gas oil contract gained $4.75 to $1,017.25/tonne.
Contact Sam Fletcher at [email protected].
