Sam Fletcher
OGJ Senior Writer
HOUSTON, Nov. 11 -- Energy prices retreated Nov. 10 as Tropical Storm Ida drizzled away without causing much disruption to the production of oil and gas in the Gulf of Mexico.
“Roughly 43% of oil and 28% of gas production in the Gulf of Mexico had been briefly idled due to Ida, though it ultimately proved a nonevent,” said analysts in the Houston office of Raymond James & Associates Inc.
The Dow Jones Industrial Average and the US Dollar Index “were also in idle mode so crude oil had little chance to do anything,” said Olivier Jakob at Petromatrix, Zug, Switzerland. “West Texas Intermediate has been trading this week perfectly at par to implied value of the euro-dollar correlation model.”
The price of crude advanced in early trading Nov. 11 after China, the world's second largest oil importer, announced crude imports hit 4.5 million b/d, “the second-highest level on record,” said Raymond James analysts. “For comparison, the US recently imported 8.1 million b/d of crude.”
Jakob reported, “The latest numbers for China are indicating a strong growth in power generation (helped partly by the lower base in October 2008) while imports of crude oil are steady on the high side, and with a year-on-year increase of 752,000 b/d are a match to the increase in refinery runs of 825,000 b/d.”
A declining dollar helped support oil's early gains Nov. 11 on the New York market. Jakob said, “The underlying issue remains unchanged: a continued depreciation of the dollar is needed to maintain the buying momentum across asset classes.” The euro would have to be valued at $1.525 for WTI to break the recent highs of $82/bbl. An $85/bbl price would require the euro to rise to the equivalent of $1.55, and it would have to climb to 2008 highs of $1.60 to lift oil prices to $90/bbl. “This has nothing do to with any oil supply and demand fundamentals, but current investment flows are riding more the Federal Reserve bubble than fundamentals, and typically will continue to do so until something bursts,” Jakob said.
Energy prices
The December contract for benchmark US light, sweet crudes lost 38¢ to $79.05/bbl Nov. 10 on the New York Mercantile Exchange. The January contract dropped 43¢ to $79.64/bbl. On the US spot market, WTI at Cushing, Okla., was down 38¢ to $79.05/bbl. Heating oil for December slipped by 1.04¢ to $2.05/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month dipped 0.44¢, but its closing price was virtually unchanged at an average $1.98/gal.
The December natural gas contract fell 20.3¢ to $4.47/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 8¢ to $3.79/MMbtu. Natural gas futures are “sitting on an important support line at $4.40/MMbtu,” said Jakob. Moreover, he said, “US weather in the Midwest is still warmer than usual, the United States Natural Gas Fund LP has started its rolling of positions, and on any downside break of $4.40/MMbtu, we will watch for a gap closing to $4/MMbtu.”
In London, the December IPE contract for North Sea Brent crude lost 27¢ to $77.50/bbl. Gas oil for November declined 50¢ to $628.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was down 7¢ to $76.50/bbl Nov. 10.
Contact Sam Fletcher at [email protected].
