Sam Fletcher
OGJ Senior Writer
HOUSTON, Feb. 9 -- Crude and petroleum products futures rallied Feb. 8 to reclaim some of their recent losses in the New York market, but the huffing and puffing economies of the five PIIGS (Portugal, Ireland, Italy, Greece, and Spain) continue to sway commodity and equity markets.
Corporate stock prices generally tumbled in recent weeks amid fears the debt problems of PIGGS would spread to other members of the European Union and further undermine the euro. Stocks were up in early trading Feb. 9 as Greece pledged new austerity measures to increase retirement ages, raise fuel taxes, and accelerate reforms.
The Dow Jones Industrial Average climbed back above the psychologically important 10,000 mark after closing below that level Feb. 8 for the first time in 3 months. However, Greek workers are scheduled to strike Feb. 10 in protest against government efforts to tighten spending.
“Crude finished up 1% after gaining support from a weaker dollar, forecasts for additional snow in the Mid-Atlantic [states], and confirmation by Iran's OPEC governor that oil supply and demand [are] in balance,” said analysts in the Houston office of Raymond James & Associates Inc.
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “West Texas Intermediate was consolidating yesterday, but the late weakness in US equities and the late strength in the dollar index could again weigh against the potential rebound of WTI from the sell off of last week. WTI is in front of the key support of the 200-day moving average, but [for] that support to hold will require greater stability in the financial markets.”
Like others, Jakob awaits “the reality check” of weekly US oil inventory statistics. “We would expect to see more crude oil stock build in the US Gulf [Coast] as there was still some catching up of discharge to do after the delays linked to the oil spill in the Sabine Pass,” he said (OGJ Online, Jan. 27, 2010).
He noted, “The lower demand on the US East Coast due to the snow disruptions will not yet be apparent in this week’s report but rather in the next 2, and that is something to keep in mind when reacting to the product numbers this week. More snowfalls are expected today and tomorrow on the US East Coast and will continue to negatively impact demand for driving fuels. The US Administration remains shut down due to the snow for the second day in a row, hence we can not exclude that the release of the weekly statistics will be delayed.”
Jakob said, “Winter is not yet over but what matters for heating oil demand is the cold, not the snow, and the cracks have continued to come off slightly . . . on the expectation that the snow will create more driving demand destruction than it creates heating demand.” He said, “The WTI contango remains narrow, but the US Gulf differential to WTI continues to move to a greater discount. March Brent expires [Feb. 11] and the contango on the next spreads is widening slightly. Freight rates have literally plunged over the last 10 days, and the trend will need to be monitored as if it is continued it should start to bring renewed interest in floating storage economics.”
Natural gas prices fell 2% on Feb. 8 “despite a weather forecast calling for a second snow storm and blizzard-like conditions for the Northeast,” said analysts at Pritchard Capital Partners LLC in New Orleans. The weakness in gas futures prices is “due to continued concerns domestic shale production continues to increase and renewed concerns that the current natural gas price premium for Northeastern US markets over the UK price point may suggest LNG cargoes will be diverted from Europe to the US,” they said. Nevertheless, gas prices were up 1% in early trading Feb. 9.
Energy prices
The March contract for benchmark US sweet, light crudes gained 70¢ to $71.89/bbl Feb. 8 on the New York Mercantile Exchange. The April contract advanced 77¢ to $72.29/bbl. On the US spot market, WTI at Cushing, Okla., was up 70¢ to $71.89/bbl. Heating oil for March delivery increased 1.07¢ to $1.89/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month inched up 0.76¢, also to $1.89/gal.
The March natural gas contract dropped 11.4¢ to $5.40/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., climbed 11¢ to $5.73/MMbtu.
In London, the March IPE contract for North Sea Brent crude was up 52¢ to $70.11/bbl. Gas oil for February fell $8 to $567.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped 85¢ to $68.86/bbl.
Contact Sam Fletcher at samf@ogjonline.com
