Sam Fletcher
OGJ Senior Writer
HOUSTON, Feb. 22 -- A stronger dollar limited energy prices in early trading Feb. 19 in the New York market, but crude oil prices climbed to a new 5-week high in later trading as the strike by refinery workers in France against Total SA appeared to threaten fuel shortages.
Total’s 6 refineries and 12 product depots in France were hit by labor strikes supporting the Feb. 16 takeover by workers of the company’s idle 137,000-b/d Dunkirk refinery (OGJ Online, Feb. 17, 2010). In New Orleans, analysts at Pritchard Capital Partners LLC said, “If the Total strike persists throughout this week reducing French gasoline outputs, it could limit US gasoline imports.”
The Federal Reserve increased its interest rate last week, prompting a strong rally in the US dollar. But Pritchard Capital Partners said crude rallied “as traders’ positive perceptions of a strengthening economy outweighed negative concerns that a tighter money supply could reduce demand for oil. Crude, however, may be poised to fall beginning this week as it meets technical resistance at $80/bbl.”
Meanwhile, the Consumer Price Index reported Feb. 19 prices rose 0.2% in January, while the core inflation rate fell a seasonally adjusted 0.1%, which helped put a floor under energy prices.
After jumping 8% in the shortened week with the New York market closed for the Presidents Day holiday Feb. 15, crude prices were relatively flat in early trading Feb. 22. However, natural gas was down more than 2% despite the National Weather Service’s 8-14-day prediction of a “high probability” of unseasonably cold temperatures in the Southeast and Southern Plains in March.
“New data points out of China indicating the country processed 29% more crude in January on a year-to-year basis suggest Chinese crude demand continued its secular uptrend last month,” said analysts in the Houston office of Raymond James & Associates Inc.
Pritchard Capital analysts said, “We believe that despite one of the strongest heating load season on record, the market will continue to have bearish sentiments for natural gas in 2010, as supplies have held firm meeting the demand adequately owing to the structural shift in natural gas supply dynamics as a result of ongoing drilling and completion efficiencies in North American natural gas shale plays. Furthermore, we believe reversal of coal-to-gas fuel switching and demand associated with it, combined with the availability of new LNG supplies, will dampen any sharp appreciation in natural gas prices.”
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “In the past few weeks, crude oil has lost of its correlation characteristics to the dollar index, but it has however regained a correlation to the equity indices. This will become increasingly problematic, given that further improvements in equities would under the current correlation translate into higher oil prices, which in turn will work against the underlying recovery. An economic recovery will only be viable when crude oil starts to trade a correlation to its own fundamentals rather than a correlation to other financial indices (dollar, equities).”
Jakob said, “As far as the global trend of the US banking sector helping to fuel the economic recovery, there is no visible change: cash hoarded by the US commercial banks increased further and reached a new record high. US banks are hoarding $1.08 trillion more than in the same week in 2008 and $500 billion more than in the same week last year. Meanwhile, commercial and industrial loans made by US banks continue to decline, although the rate of decline is starting to slow down.”
Energy prices
The March contract for benchmark US light, sweet crudes climbed 75¢ to $79.81/bb Feb. 19 on the New York Mercantile Exchange. The April contract advanced 64¢ to $80.06/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 75¢ to $79.81/bbl. Heating oil for March delivery gained 1.83¢ to $2.07/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 1.65¢ to $2.09/gal.
The March natural gas contract dropped 12.8¢ to $5.04/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 30¢ to $5.09/MMbtu.
In London, the April IPE contract for North Sea Brent crude was up 41¢ to $78.19/bbl. Gas oil for March gained $6.50 to $631/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 68¢ to $75.17/bbl.
Contact Sam Fletcher at [email protected].
