Sam Fletcher
OGJ Senior Writer
HOUSTON, Apr. 21 -- Crude prices plunged 9%, and the front-month natural gas contract fell to the lowest close in more than 6 years Apr. 20 as the US dollar strengthened and fears of a long economic recovery continued.
"On [Apr. 17], equities and the dollar were both rising, and oil was in a complete standstill; on [Apr. 20] equities were falling, the dollar index was rising, and oil had nowhere to go other than down in the basement," said Olivier Jakob at Petromatrix, Zug, Switzerland.
This is the fourth consecutive week that has started with a sell-off of crude futures contracts. "In previous weeks, West Texas Intermediate then managed to climb back," Jakob said. But the May contract for benchmark US crude expires at the close of trade Apr. 21, prompting more volatility on the New York Mercantile Exchange as traders scramble to adjust positions.
Meanwhile, Jakob said, "Oil fundamentals are not tight enough to carry crude above $55/bbl, and as soon as the combined support of strong equities and weak dollar goes missing, then crude oil starts to move back to the lower band of the trading range."
Both crude and natural gas were flat in early trading Apr. 21. The price of oil has plunged more than $100 from a record-high in excess of $147/bbl in July as the Organization of the Petroleum Exporting Countries has curbed production. Front-month crude has traded around $50/bbl during April. Gas prices have declined 74% from a July high as the economy contracted.
Energy prices
The May contract for benchmark US sweet, light crudes fell $4.45 to $45.88/bbl Apr. 20 on NYMEX. On the US spot market, WTI at Cushing, Okla., was down the same about to the same close. The June contract dropped $3.96 to $48.51/bbl Heating oil for May lost 9.09¢ to $1.33/gal on NYMEX. The May contract for reformulated blend stock for oxygenate blending (RBOB) declined 8.08¢ to $1.41/gal.
The May natural gas contract dropped 18.9¢ to $3.54/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was unchanged at $3.52/MMbtu.
In London, the June IPE contract for North Sea Brent crude lost $3.49 to $49.86/bbl. The May gas oil contract fell $27.50 to $431/tonne.
The average price for OPEC's basket of 12 reference crudes was down $1.86 to $49.59/bbl on Apr. 20.
Contact Sam Fletcher at [email protected].
