Sam Fletcher
OGJ Senior Writer
HOUSTON, Sept. 28 -- The near-month contract for natural gas futures fell more than 2% Sept. 27 in the New York market with forecasts of cooling weather and no threat by hurricanes to production in the Gulf of Mexico. That October contract is to expire Sept. 28 at the close of trading.
“The tropical season has been very strong so far this year, but none of the storms have made it to the gulf and that results in an overhang of stock cushion,” said Olivier Jakob at Petromatrix in Zug, Switzerland. ConocoPhillips, he noted, “has indicated that it is shutting some onshore natural gas production due to low prices, and we can guess that a few companies would have welcomed a storm for the excuse it provides to shut production and rebalance the supply and demand without being politically incorrect.”
The front-month crude contract increased a few cents Sept. 27 in New York, but prices for subsequent monthly contracts retreated. “Oil fell alongside US equities yesterday and was weakened as the dollar strengthened alongside European fiscal debt concerns,” said analysts in the Houston office of Raymond James & Associates Inc. Energy corporate stocks fell with commodities, barely outperforming broader market drops. In early trading Sept. 28, gas was up a few pennies while oil was down moderately, Raymond James analysts reported.
At Standard New York Securities Inc., part of the Standard Bank Group, analyst Leon Westgate said, “Crude oil ended yesterday broadly flat, with front-month West Texas Intermediate tracking fluctuations in the dollar and equity markets.”
He said, “The oil market is currently dominated by potential gasoline inventory build. US gasoline production has outstripped demand for the last 3 weeks as the driving season comes to an end, with that trend likely to continue being reflected” in industry and government inventory reports this week.
Westgate said, “Generally speaking, the market has lost confidence in the short-term demand pick-up, with sentiment taking a beating. While the negative view may be only temporary, the bearish stance nevertheless looks hard to shake over the short term.”
Adam Sieminski, chief energy economist for Deutsche Bank in Washington, DC, said, “Oil prices may be driven higher by rising equity markets in the fourth quarter given the tendency of the Standard & Poor’s 500 index to rally around US mid-term elections. However, we believe sustainable oil price rallies need to be accompanied by a more convincing decline in inventories.”
He said, “The declining share of the Organization for Economic Cooperation and Development as represented in the global gas oil balance and the non-OECD’s growing share has significant ramifications for gas oil seasonality. On a longer term basis, the northern hemisphere winter will be a less critical driver of the global gas oil balance.”
As for natural gas, Sieminski said, “Unconventional gas has significantly changed the supply picture. To reduce supply and raise demand, we see lower prices having a more reliable impact than government intervention.”
Energy prices
The November contract for benchmark US sweet, light crudes inched up 3¢ to $76.52/bbl Sept. 27 on the New York Mercantile Exchange. The December contract dropped 15¢ to $77.50/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.53 to $76.52/bbl, the same closing price as the November futures contract. Heating oil for October delivery declined 0.78¢ to $2.12/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 0.17¢ but closed virtually unchanged at a rounded $1.95/gal.
The October contract for natural gas dropped 8.1¢ to $3.80/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was down 31¢ from the previous reported session to close Sept. 27 at $3.79/MMbtu.
In London, the November IPE contract for North Sea Brent lost 30¢ to $78.57/bbl. Gas oil for October fell $11.50 to $671.25/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 5¢ to $75.06/bbl.
Contact Sam Fletcher at [email protected].
Rystad Energy.
