MARKET WATCHEnergy futures prices fall as speculators pull out of the market
Sam Fletcher
Senior Writer
HOUSTON, Oct. 20 -- Energy futures prices plunged Friday as large speculative funds sold off supply obligations contracted at previously lower prices and moved investments into gold and other commodities in the wake of larger-than-expected increases in US oil inventories.
The Commodity Futures Trading Commission released data Friday showing that, for the week ended Oct. 14 on the New York Mercantile Exchange, big speculators posted net long positions—i.e., the number of "take-delivery" contracts held exceeds the number of "supply" contracts sold—for the first time since early September.
The American Petroleum Institute reported late Thursday that US oil stocks jumped by an unexpected 6.98 million bbl to 297.2 million bbl during the week ended Oct. 10 (OGJ Online, Oct. 17, 2003). The US Energy Information Administration had earlier estimated US crude inventories increased by 3.8 million bbl to 290 million bbl during that period.
Both reported continued declines in US stocks of gasoline and distillate fuel. That, said Paul Horsnell, head of energy research at Barclays Capital Research, a division of Barclays Bank PLC, London, "reinforces the [previous] pattern, in that the crude market continues to ease while the product market remains tight."
NYMEX Energy prices
Prices for the November contract for benchmark US light, sweet crudes declined in each of the last five trading sessions trading sessions on NYMEX, down by a total of $1.29/bbl for the week. That included a loss of 86¢ to $30.86/bbl Friday, with the December contract down by 96¢ to $30.70/bbl the same day. On the cash spot market, West Texas Intermediate crude at Cushing, Okla., lost 85¢ to $30.68/bbl Friday.
On NYMEX, heating oil for November delivery fell by 3.12¢ to 83.14¢/gal Friday. Unleaded gasoline for the same month lost 2.65¢ to 84.94¢/gal.
The November natural gas contract plummeted 37.5¢ to $5.04/Mcf Friday on NYMEX, "pressured by sinking crude oil prices and a crumbling cash [spot gas] market amid expectations of soft weekend demand and dwindling concerns about storage," said analysts Monday at Enerfax daily.
"The [gas futures] market lost [a total of] 62¢[/Mcf], or 11%, last week on soft shoulder-month demand and a lagging cash market after surging 19% the prior week on expectations for a cold winter," they said. "Storage is filling up, so producers are running out of options to get rid of gas."
Based on his weekly gas supply-demand model, Stephen A. Smith, founder and president of Stephen Smith Energy Associates, Natchez, Miss., is projecting 83 bcf of gas were injected into US underground storage in the week ended Friday, surpassing the minimum "comfort zone" of 3 tcf of gas in storage. "If our projections are correct, the storage deficit was eliminated last week, and by our measure, we have now moved to a surplus of about 33 bcf (and rising)," he reported Monday.
As a result, Smith said, it will take a colder-than-normal winter to push natural gas prices above $6/Mcf again this year.
Enerfax analysts are projecting that the EIA on Thursday will report gas injections of 75-85 bcf during last week.
Other energy prices
In London, reports of rising US oil stocks triggered an aggressive liquidation of crude positions Friday on the International Petroleum Exchange. The November contract for North Sea Brent oil fell by 97¢ to $29.03/bbl. The November gas oil contract lost $13.25 to $249.25/tonne on IPE. But the November natural gas contract inched up by 0.3¢ to the equivalent of $4.32/Mcf.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 85¢ to $28.89/bbl Friday. However, for all of last week OPEC's basket price increased by $1.61 to $29.80/bbl.
So far this year, OPEC's basket price has averaged $27.90/bbl, at the upper end of its target of $22-28/bbl and exceeding its average price of $24.36/bbl for all of 2002.
Contact Sam Fletcher at [email protected]