Sam Fletcher
OGJ Senior Writer
HOUSTON, Mar. 24 -- Energy prices rose Mar. 23, pulled up by improvements in the equity market as traders reacted positively to more information on President Barack Obama's plan to use both government and private resources to boost the US economy.
"In last 3 trading days crude oil has broken above its 50-day moving average for the first time since July 2008," said analysts at Pritchard Capital Partners LLC, New Orleans. The catalyst for the continued rally "other than the technical price action were a strike by Petrobras's work force targeting a cut in output and belief that [Treasury Secretary Timothy] Geithner's 'new toxic asset' plan in conjunction with the administration's stimulus package will accelerate global economic growth," they said.
In Houston, analysts at Raymond James & Associates Inc. reported, "The Dow Jones industrial average jumped 6.8% after the government detailed a plan to [assume] up to $1 trillion in toxic assets with the help of private investors. Energy stocks outperformed, with the Oil Service Index up nearly 10% while the Standard & Poor's E&P 1500 gained more than 9%. Oil continued its month-long rally and we would not be surprised to see crude remain strong from here."
They noted, "Natural gas has bounced from its yearly lows, but investors shouldn't put too much faith in the shoulder season inventory numbers; full storage and lower prices likely await this summer."
Olivier Jakob at Petromatrix, Zug, Switzerland, said, "The rebound in equities is encouraging but will necessitate a break of the fourth quarter [2008] range before we can start to talk of a recovery process rather than a bottoming formation."
Jakob said, "Oil has been following equities higher, but we still lack the confirmation that it is backed by sustainable financial flows." Other than Jan. 2 that was the first trading session of 2009, the daily trading volume for benchmark crude in the New York market on Mar. 20 was "at the lowest level of the year (352,000 contracts, which is half the levels seen on average in the previous week)," he said.
The oil complex was led by heating oil, "which is moving back to being almost at parity" to reformulated blend stock for oxygenate blending (RBOB), said Jakob. "On the supply side, the oil unions in Nigeria have again called off their strikes; that leaves the strike action to the Brazilians, but they do not generally extend over the announced plans." Workers at state-operated Petroleo Brasilerio SA (Petrobras) began a 5-day strike to dispute bonuses and make safety demands (OGJ Online, Mar. 23, 2009).
In other news, the National Association of Realtors said sales of existing homes rose in February from January, but the median sales price plunged to $165,400 from $195,800 during the same period in 2008. It was the second-largest price drop on record.
Energy prices
The May contract for benchmark US sweet, light crudes topped $54/bbl in intraday trading Mar. 23 before finishing at $53.80/bbl, up $1.73 for the day to the highest closing price for this year on the New York Mercantile Exchange. The June contract gained $1.93 to $55.73/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased $1.94 to $53/bbl, not yet up with the price level of the new near-month NYMEX contract. Heating oil for April jumped 8.73¢ to $1.47/gal on NYMEX. RBOB for the same month increased 3.11¢ to $1.49/gal.
The April natural gas contract climbed 6.7¢ to $4.29/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., popped up 20¢ to $4.18/MMbtu. Pritchard Capital Partners said, "The natural gas rally from the $3.70/Mcf low seen last week was attributed to short covering and natural gas following oil higher. Fundamentals for natural gas remain poor as…measures continue to show an oversupplied US natural gas market; current natural gas storage is 225 bcf above long-term average, potentially 6 bcfd of LNG coming online this year, and demand remains depressed."
In London, the May IPE contract for North Sea Brent crude increased $2.25 to $53.47/bbl. April gas oil jumped by $31.75 to $467.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes advanced $1.41 to $50.18/bbl on Mar. 23.
Contact Sam Fletcher at [email protected].
