MARKET WATCH: Energy prices register new intraday highs

Sam Fletcher
Senior Writer

HOUSTON, July 14 -- Crude prices surged again July 11, hitting a new high in intraday trading as the August contract regained in the last two trading sessions most of its losses from the first two sessions of that week.

The front-month crude contract lost a total $9.29/ bbl July 7-8 as the US dollar strengthened, then inched up just 1¢/bbl on July 9 before climbing a total of $9.03/bbl over the July 10-11 sessions in the New York market amid worries of possible supply disruptions. Trading was volatile within a wide range of more than $12/bbl during the week.

"Having reached an all-time intraday high on Friday, oil faces downward pressure in pre-market trading [July 14] as the dollar appreciated vs. the euro following an announcement by the US Treasury of plans to provide direct loans to Freddie Mac [The Federal Home Loan Mortgage Corp.] and Fannie Mae [Federal National Mortgage Assoc.]," said analysts in the Houston office of Raymond James & Associates Inc.

They said, "The stronger dollar has offset the added geopolitical risk premium related to the 5-day strike of Petrobras employees in Brazil (OGJ Online, July 11, 2008). We expect that this prospective supply disruption, as well as ongoing instability in Nigeria and Iran, will continue to add volatility to short-term oil prices."

On July 14, oil workers halted work at 33 of 42 offshore platforms in Brazil's Campos basin. Campos accounts for more than 80% of Brazil's crude output of 1.8 million b/d, or about 2% of world supply. Petrobras said it would implement a contingency plan to maintain production on the platforms, but union leaders said such an attempt would be resisted.

Raymond James said, "On the natural gas side, over the past week, prices have fallen nearly 15%, driven in part by a technical correction, as well as bearish management commentary from the CEO of a major E&P company. He points to domestic supply increases (the crux of our bearish call) that could overwhelm the market over the next couple of years, driving a return to parity with coal, instead of oil (as it relates to fuel switching)."

Analysts at Pritchard Capital Partners LLC, New Orleans, reported July 14, "A stronger dollar spurred losses for crude and products in overnight trading." They also noted: "Natural gas futures finished the week on a weak note Friday despite another record run higher in neighboring crude futures." Bullish weather factors may be hard to find in the near term, with Hurricane Bertha well out to sea in the Atlantic "and real summer heat has not arrived," they said.

In other news, President Hugo Chavez of Venezuela said in a broadcast July 13 that oil prices could hit $300/bbl, especially if ExxonMobil Corp. were to freeze Venezuelan assets again in the dispute over a nationalized oil project in that country. ExxonMobil earlier won a temporary court injunction freezing $12 billion in assets held by state-owned Petroleos de Venezuela SA. A London court later overturned that injunction, but Chavez said the US company could seek further action against Venezuela.

Energy prices
The August contract for benchmark US light, sweet crudes jumped to a record high of $147.27/bbl July 11, before closing at $145.08/bbl, up $3.43 for the day on the New York Mercantile Exchange. The September contract gained $3.33 to $145.66/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $4 to $145.66/bbl. The August contracts for heating oil and reformulated blend stock for oxygenate blending (RBOB) also registered intraday highs of $4.16/gal and $3.63/gal, respectively, on NYMEX. Heating oil closed at $4.08/gal, up 3.92¢ for the day. RBOB closed at $3.56/gal with an increase of 5.23¢.

The August natural gas contract fell 39.6¢ to $11.90/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 22¢ to $12/MMbtu.

In London, the August IPE contract for North Sea Brent crude gained $2.46 to $144.49/bbl. The August gas oil contract shot up to an intraday high of $1,339.25/tonne prior to closing at $1,325.25/tonne, up a whopping $51.50 for the day.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes escalated $6.17 to $139.85/bbl on July 11. So far this year, OPEC's basket price has averaged $107.29/bbl.

Contact Sam Fletcher at [email protected]