Sam Fletcher
OGJ Senior Writer
HOUSTON, Dec. 28 -- Energy prices generally rose in light trading Dec. 24 ahead of the Christmas holiday, with the front-month crude contract closing above $78/bbl in the New York market following a bigger-than-expected drop in US oil inventories.
The Energy Information Administration said commercial US crude inventories fell 4.9 million bbl to 327.5 million bbl in the week ended Dec. 18, surpassing the consensus among Wall Street analysts for a 1.6 million bbl decline. Gasoline stocks decreased 900,000 bbl to 216.3 million bbl in the same period. Distillate fuel inventories dropped 3.1 million bbl to 161.3 million bbl.
EIA also reported a draw of 166 bcf of natural gas from US underground storage in the week ended Dec. 18. That left working gas in storage at 3.4 tcf, still 359 bcf higher than a year ago and 395 bcf above the 5-year average.
“After 3 straight days of gains last week (up 2% on Dec. 24 alone…), crude is poised to continue its bullish streak as colder temperatures across the US are driving up prices for heating fuels. Adding support is the Labor Department's Christmas Eve report showing that jobless claims fell to 452,000 for the week ended December 19, a bigger decline than expected,” said analysts in the Houston office of Raymond James & Associates Inc. They reported both crude and gas were “poised to rise” Dec. 28 due to colder weather.
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “West Texas Intermediate had an impressive rally during Christmas week, which brings it back to the trading range in force during most of November. This was, however, achieved in a low-volume holiday trading environment, and one has only to look at the volume profile [Dec. 24] to understand that the crude oil market was ‘tight’ mostly in the last 10 min of trading.”
Jakob said, “The dollar index was about unchanged on a weekly basis (strong Dec. 21-22, weak Dec. 23-24) and this now makes WTI clearly overbought on a euro correlation basis. This also means that despite Brent moving back to a discount to WTI, Brent on a [euro price basis] is now priced at the highest level of the year, and this will not necessarily be very positive for oil demand and refining margins outside of the dollar zone.”
He said, “On a fundamental basis, the US has been experiencing harsh winter conditions in the Northeast and the Midwest, but stock levels are so much above normal that this can not yet be a genuine source of worry. The Iranian opposition is still going out on the streets of Teheran to protest, and this is leading to some repressive violence, but paradoxically this could make the imposition of further sanctions somewhat counter-productive and service the current regime rather than weaken it.”
Raymond James analysts referred to an “interesting article” in the Toronto Star, headlined “Holding out for a frozen pipe dream,” that reported the proposed natural gas pipeline from Canada's Mackenzie Valley, a project conceived more than 30 years ago, is “stuck in a political bog.” The analysts said, “This week, a major environmental assessment of the proposed project will be published. However, ecological concerns are only one of the issues surrounding the project. A more difficult hurdle to overcome is the continually rising price tag, which currently stands at an estimated $16.2 billion, up from only $2 billion in 2002. The project consortium—ExxonMobil, ConocoPhillips, and Shell—wants financial support from the Canadian government, but with North America already facing a structural gas glut, it's debatable whether Ottawa will agree to help.”
Energy prices
The February contract for benchmark US light, sweet crudes gained $1.38 to $78.05/bbl on the New York Mercantile Exchange. The March contract advanced $1.41 to $78.66/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.11 to $77.05/bbl. Heating oil for January increased 2.38¢ to $2.04/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 2.3¢ to $1.99/gal.
The January natural gas contract lost 17.8¢ to $5.64/MMbtu on NYMEX—the largest gas price drop in 2 weeks. On the US spot market, gas at Henry Hub, La., climbed 18.5¢ to $5.78/MMbtu.
In London, the February IPE contract for North Sea Brent crude was up 86¢ to $76.31/bbl. Gas oil for January delivery dropped $4 to $607/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased $1.53 to $74.24/bbl. OPEC’s basket price has averaged $60.82/bbl so far this year, vs. an average $94.45/bbl for all of 2008.
Contact Sam Fletcher at [email protected].
Rystad Energy.
