Sam Fletcher
OGJ Senior Writer
HOUSTON, Oct. 19 -- After trading near a 2-week low in the previous session, the front-month crude contract rebounded 2.25% Oct. 18, wiping out its previous loss in the biggest 1-day gain in the New York market since the end of September.
Crude prices gained as the dollar weakened on mounting expectations of additional stimulus of the economy by the Federal Reserve System. “Meanwhile, natural gas continued its downward trend, falling 3% to its lowest level in over a year,” said analysts in the Houston office of Raymond James & Associates Inc. They said gas retraced some of its losses in early trading Oct. 19, while crude was down again more than 1%.
Front-month prices “continue to fluctuate” between $80-84/bbl. At Standard New York Securities Inc., the Standard Bank Group, Walter de Wet said, “We expect crude prices to remain largely range-bound with selling into rallies above $84 until the Federal Open Market Committee [policy-making arm of the Federal Reserve Bank] meeting on Nov. 3. Within this trading-range we expect volatility.”
He reported, “On the back of the possibility of renewed quantitative easing (QE), potential inflation concerns and how it may affect commodity prices are at the forefront again. In the current environment we believe it’s not inflation that will drive commodity prices higher but rather liquidity. We’ve seen over the past decade that inflation and liquidity is not necessarily the same thing. Will more QE result in much higher inflation? It’s possible but not our base case scenario (at least not in 2011). We look for liquidity to support prices, not inflation. Empirically we find that precious metals (gold in particular) benefit the most from liquidity, followed by crude oil and then base metals.”
Analysts generally agree crude demand fundamentals remain weak, with inventory levels high. “Yesterday’s weak US industrial production figures disappointment on the downside and is another indication that demand for especially middle-distillates in the US may remain weak and inventories high for months to come,” said De Wet.
Energy prices
The November contract for benchmark US sweet, light crudes climbed $1.83 to $83.08/bbl Oct. 18 on the New York Mercantile Exchange. The December contract escalated $1.87 to $83.80/bbl.
On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.83 to $83.08/bbl, still in lock-step with the futures market. Heating oil for November delivery increased 4.53¢ to $2.28/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month gained 4.77¢ to $2.15/gal.
The November contract for natural gas dropped 10.4¢ to $3.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5.5¢ to $3.37/MMbtu.
In London, the December IPE contract for North Sea Brent was up $1.92 to $84.37/bbl. Gas oil for November gained $3.50 to $715.25/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped 83¢ to $79.03/bbl.
Contact Sam Fletcher at [email protected].
Rystad Energy.
