MARKET WATCH: Fighting in Gaza hikes oil prices
Oil prices jumped Nov. 19 with crude climbing 2.7% in the New York futures market amid continued fighting between Israel and Hamas militants. However, the natural gas price dropped 1.9% on warmer-than-normal weather forecasts.
“The conflict in Gaza kept crude oil prices on the up for the better part of yesterday” with the front-month benchmark US crude closing at “a level last seen a month ago,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “After initial optimism over Egyptian-led efforts to broker a ceasefire between Israel and Hamas, tension appears to have escalated once more. Palestinians continue to fire rockets into Israel today, while Israeli military forces continued attacks on Hamas and associated specific targets in Gaza. A diplomatic resolution remains uncertain as both parties are taking a hardline on any proposed conditions for an end to the hostilities.”
However, he said, “Demand and oversupply considerations, especially concerning the US and the Euro-zone, have started to bite this morning, bringing prices some lower for both [West Texas Intermediate and North Sea Brent]. Given the weak economic environment, the market is particularly sensitive to prices pushing too high and the possibility of demand destruction. A stronger dollar and some profit-taking are no doubt also playing a part in this morning’s weakness. We do not see much room for a significant pull-back as long as tensions between Israel and Hamas remain at these elevated levels.”
In Houston, analysts with Raymond James & Associates Inc. credited the escalation of crude prices partially to suggestions from both Republicans and Democrats of a possible budget compromise to avoid the fiscal cliff of automatic tax hikes and spending cuts at yearend. That speculation boosted the Dow Jones Industrial Average more than 200 points. The Oil Service Index and SIG Oil Exploration & Production Index followed crude higher, gaining 3.22% and 2.85%, respectively.
Meanwhile, economic indicators were mixed, with the Labor Department reporting US unemployment rose to 7.9% in October but has declined a full point in the past year.
The US Department of Commerce reported a 3.6% increase in construction-starts for new homes in October. However, single-family home construction dipped 0.2% from a 4 -year high the previous month. The month-to-month more volatile apartment construction, increased 10%.
Energy prices
The new front-month January contract for benchmark US sweet, light crudes escalated $2.36 to $89.28/bbl Nov. 10 on the New York Mercantile Exchange. The February contract climbed $2.33 to $89.80/bbl. On the US spot market, WTI at Cushing, Okla., rose $2.61 to match the new front-month futures contract’s closing price of $89.28/bbl.
Heating oil for December delivery bumped up 8.83¢ to $3.08/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 4.44¢ to $2.75/gal.
However, the December natural gas contract fell 7.1¢ to $3.72/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., spiked 14.2¢ to $3.65/MMbtu.
In London, the January IPE contract for North Sea Brent was up $2.75 to $111.70/bbl. Gas oil for December jumped $31.50 to $952/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased $1.72 to $108.76/bbl.
Contact Sam Fletcher at [email protected].
About the Author
Sam Fletcher
Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.