MARKET WATCH: Energy prices climb higher

Energy prices generally increased Apr. 7, with the front-month crude contract again approaching the record high established in March on the New York market.

April 8, 2008

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Apr. 8 -- Energy prices generally increased Apr. 7, with the front-month crude contract again approaching the record high established in March on the New York market.

"Commodities rallied," said analysts in the Houston office of Raymond James & Associates Inc. "Repairs on a Finnish refiner's diesel plant led to further diesel supply concerns, which have already been tight throughout Europe due to environmental regulations and refinery outages. Despite these concerns and the current high commodity price environment, increases in [crude] production are not likely as [officials of the Organization of Petroleum Exporting Countries] continue to reiterate their belief that crude supplies are adequate."

Company officials said Production Line Four caught fire Apr. 4 during a planned maintenance outage at Neste Oil Corp.'s 200,000 b/d refinery at Porvoo, Finland, one of the most sophisticated and efficient refineries in Europe. The fire was extinguished in an hour, with no reports of personal injuries or environmental damage. Officials said the fire had no effect on operations of the rest of the refinery or on product deliveries. Cause of the fire and resulting damage are still being investigated.

Meanwhile, Olivier Jakob at Petromatrix, Zug, Switzerland, reported, "Technical traders are trying to recreate an upward trending momentum" in the oil market. The May contract for benchmark US crudes broke previous resistance at $108.22/bbl on the New York market and now faces the next target of $111.80/bbl. "This would be reachable within 1 day of current volatility, but there are still a few hurdles in the way. The trend in crude oil is a correlation to the dollar index, and the dollar has been recently failing to move out of a range. Yesterday, crude oil was leading the dollar index, which made West Texas Intermediate overpriced to the dollar correlation," Jacob said.

WTI has gained more than $8/bbl since Apr. 1. "But there are no signs of strong investment flows as open interest on all crudes (on the IntercontinentalExchange Inc. and New York Mercantile Exchange) has only risen by 6,500 contracts since then. Trading volume is also light; overall crude volume on Apr. 4 was at the lowest level in 29 trading days (full sessions). Trading on WTI options has also considerably slowed down. Across the commodity spectrum, price activity yesterday was also mixed and not showing any clear across-the-board trends," said Jacob.

Energy prices
The May contract for benchmark US crude jumped by $2.86 to $109.09/bbl Apr. 7 on NYMEX. The June contract gained $2.79 to $108.55/bbl. On the US spot market, however, WTI at Cushing, Okla., was down $1.20 to $105.03/bbl. Heating oil for May delivery escalated 9.22¢ to $3.08/gal on NYMEX. The May contract for reformulated blend stock for oxygenate blending (RBOB) increased 2.68¢ to $2.78/gal.

The May natural gas contract shot up 46.9¢ to $9.79/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 18.5¢ to$9.57/MMbtu.

In London, the May IPE contract for North Sea Brent increased $2.24 to $107.14/bbl. The April contract for gas oil jumped $40.75 to $1,004/tonne.

The average price for OPEC' basket of 13 benchmark crudes gained $2.53 to $101.16/bbl on Apr. 7.

Contact Sam Fletcher at [email protected].