MARKET WATCH: Energy prices drop as dollar strengthens

The front-month crude contract fell Mar. 30, closing below $49/bbl and ending a 6-week climb that had boosted oil prices 40% on the New York futures market.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 31 -- The front-month crude contract fell Mar. 30, closing below $49/bbl and ending a 6-week climb that had boosted oil prices 40% on the New York futures market.

That marked the first time the front month contract closed below $50/bbl since Mar. 18. It was an "ugly day," said analysts in the Houston office of Raymond James & Associates Inc. "Crude decreased 7.5% as the dollar increased versus the euro. Additionally, the state of the US auto industry renewed concerns about the economy and oil demand."

President Barak Obama's administration threatened to break up General Motors Corp. and Chrysler LLC and allow the two auto manufacturers to go into bankruptcy protection.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, "A strong downward correction in equities and a continued rebound in the dollar index could not add up to anything else than a strong downward correction in crude oil." Nonetheless, daily trading volume "remains remarkably light," he said.

However crude prices increased during early trading Mar. 31, and Raymond James analysts said the market "is poised for its largest monthly gain since June."

Energy prices
The May contract for benchmark US sweet, light crudes dropped $3.97 to $48.41/bbl Mar. 30 on the New York Mercantile Exchange. The June contract lost $3.82 to $50.20/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $3.97 to $48.41/bbl. Heating oil for April declined by 9.02¢ to $1.34/gal on NYMEX. The reformulated blend stock for oxygenate blending contract for the same month fell 10.8¢ to $1.38/gal.

The new May contract for natural gas inched up 0.2¢ to $3.74/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 3¢ to $3.69/MMbtu. In New Orleans, analysts Pritchard Capital Partners LLC said relatively weak shoulder season demand in March and April and additional availability of hydro power will keep natural gas prices low. The Mar. 26-27 collapse in NYMEX prices for the April contract "does not bode well for bid week gas prices since the contract went off the board at $3.63/Mcf with regional prices at lower levels," they said.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes fell by $2.69 to $47.72/bbl. Mar. 30. So far this year, OPEC's market price has averaged $42.92/bbl.

Contact Sam Fletcher at samf@ogjonline.com

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