Sam Fletcher
OGJ Senior Writer
HOUSTON, July 13 -- Energy prices declined July 12 with the front-month crude contract falling just below $75/bbl after three sessions of consecutive gains in the New York market.
Analysts in the Houston office of Raymond James & Associates Inc. reported energy stocks underperformed the broader market “in one of the quietest sessions in months on Wall Street.”
Olivier Jakob at Petromatrix, Zug, Switzerland, wondered if West Texas Intermediate may be suffering “correlation fatigue.” He said, “It has recently lost correlation strength to the euro, weakened its correlation to equities, and yesterday started to go as well against the Volatility Index (VIX), which was up to now the strongest correlation trade. The VIX was lower yesterday and down to 24.43%, but that did not prevent WTI from trading lower and this despite a shallow contango.”
He said, “The average of the correlation values (VIX, the euro, and Standard & Poor’s 500 index) has a calculated value of $76.31/bbl compared to the close of $74.95/bbl, but it does feel that we are entering an environment of less active correlation trades.”
Jakob said, “The problem for oil remains that there has not been any visible stock draws in 2010. Offshore stocks of distillates were reduced, but they transferred to onshore stocks and gasoline stocks never got into a tight situation. The WTI August contract expires a week from now, and we will then start to trade already the end of the summer (September contract). The supply tightness that [earlier caused] a few banks to forecast $90/bbl crude oil by mid-2010 never materialized, and we are leaving the summer with ample stocks. With spare refining capacity in the Atlantic Basin even if there are some hurricane disruptions, the system should be able to cope without too great stress. Any hurricanes will, however, have to wait a little bit as Saharan dust over the Atlantic is preventing tropical formations this week. The gasoline crack was under pressure yesterday, and we note a continued reduction of open interest in reformulated blend stock for oxygenate blending (RBOB).”
Energy prices
The August contract for benchmark US sweet, light crudes lost $1.14 to close at $74.95/bbl July 12 on the New York Mercantile Exchange. The September contract dropped $1.19 to $75.44/bbl. On the US spot market, WTI at Cushing, Okla., was down $1.14 to $74.95/bbl. Heating oil for August delivery declined 3.44¢ to $1.99/gal on NYMEX. RBOB for the same month decreased 4.2¢ to $2.03/gal.
The August natural gas contract lost 1.4¢ to $4.39/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.5¢ to $4.42/MMbtu.
In London, the August IPE contract for North Sea Brent crude dropped $1.05 to $74.37/bbl. Gas oil for July was unchanged at $639.25/tonne. “The ICE gasoil deliveries into the expiry of the July contract were at the highest level in 5 months and close to five times higher than a year ago,” Jakob said.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes lost 79¢ to $72/bbl.
Contact Sam Fletcher at [email protected].
Rystad Energy.
