MARKET WATCH: Crude continues trading in narrow price range

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 20 -- Energy prices generally increased modestly Apr. 17, with the front month crude contract again climbing above $50/bbl on the New York market.

For the fifth consecutive week, front-month contracts for West Texas Intermediate finished the week "almost unchanged" within a narrow price range, said Olivier Jakob at Petromatrix, Zug, Switzerland.

Both crude and gas futures prices were down in early trading Apr. 20. "Over the weekend, US officials voiced opinions that the US economy remains strained and that any recovery will be slow and lengthy. This bearish demand sentiment has been echoed by the International Energy Agency recently, which believes we may need to wait until 2010 before seeing a meaningful recovery in oil demand," said analysts in the Houston office of Raymond James & Associates Inc.

In New Orleans, analysts at Pritchard Capital Partners LLC said, "Houston Ship channel pricing shows, at the margin, that industrial demand seems to have bottomed." They said, "The consensus view that US storage capacity and the 14% year-over-year rise in US dollar will attract 2.5 bcfd of LNG imports in coming months."

Moreover, they said, "The falling rig count will lead to a balanced [gas] market in 2010 with net deliverability to decline 3 bcfd by yearend (assuming an average 900 gas rigs running this year). With gas unlikely to see pricing much above $3/Mcf before October at most points, we believe activity levels could be more severe than expected given marginal industry drilling economics. Costs have fallen far more quickly than was discussed on fourth-quarter conference calls. We believe costs are down nearly 20% since forth quarter."

Analysts at KBC Market Services, a division of KBC Process Technology Ltd. in Surrey, UK, noted, "Once again Brent is lording it over WTI with a $3/bbl premium that has been gradually increasing for just over a week." KBC analysts, said, "We remain confident that, although the US oil demand picture remains disappointing, as long as there is no significant deterioration and the Organization of Petroleum Exporting Countries maintains production discipline oil prices will move gently upwards." They foresee prices possibly averaging $55/bbl in the second quarter, $60/bbl in the third quarter, and $65/bbl in this year's last quarter.

Meanwhile, China Mainland Marketing Research Co. said Chinese refineries increased production in March for the first time in 5 months, up 0.7% from a year ago to 6.9 million b/d, indicating increasing demand in that country.

Energy prices
The soon-to-expire May contract for benchmark US light, sweet crudes gained 35¢ to $50.33/bbl Apr. 17 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing, Okla., was up the same amount to the same finish. The June contract was up 31¢ to $52.47/bbl on NYMEX. Heating oil for May delivery inched up 0.07¢ but was virtually unchanged at an average $1.42/gal at closing. The May contract for reformulated blend stock for oxygenate blending (RBOB) increased 1.84¢ to $1.49/gal.

Natural gas for the same month escalated 13¢ to $3.73/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 4.5¢ to $3.52/MMbtu.

The average price for OPEC's basket of 12 reference crudes lost 10¢ to $51.45/bbl on Apr. 17.

Contact Sam Fletcher at samf@ogjonline.com.