MARKET WATCH: Crude, gas prices down in early trading after holiday
The front-month US benchmark oil contract was down 4.3% in premarket trading Feb. 17 after rebounding above $37/bbl Feb. 13 on the New York market ahead of the Presidents Day holiday.
OGJ Senior Writer
HOUSTON, Feb. 17 -- The front-month US benchmark crude contract was down 4.3% in premarket trading Feb. 17 after rebounding above $37/bbl Feb. 13 on the New York market ahead of the Presidents Day holiday that closed US markets Feb. 16.
Oil prices were down in earlier trading in London. After falling for five consecutive trading sessions to the lowest price of the year, the March contract for benchmark US crude had jumped by $3.53 to $37.51/bbl Feb. 13 on the New York Mercantile Exchange as traders adjusted positions ahead of the long weekend (OGJ Online, Feb. 16, 2009).
Natural gas prices continued to fall, down 4.1% premarket Feb. 17 as New York traders ignored 6-10 days forecasts for a cold snap in much of the Midwest, East, and South. "Temperatures could be 10-15° below normal across the East in the wake of the storm," said analysts at Pritchard Capital Partners LLC, New Orleans.
In Houston, analysts at Raymond James & Associates Inc. warned, "Look for broader market concerns to weigh on energy stocks [Feb. 17] with the Dow [Jones Industrial Average] and S&P 500 [Index] futures down ahead of the [market opening]. President [Barack] Obama is set to sign into law the $787 billion stimulus package, but the market doesn't seem to think that this plan is going to solve the economic problems in the short term."
Raymond James analysts said West Texas Intermediate prices would be $5-10/bbl higher now if not for the "temporary glut of crude" at the primary delivery point in Cushing, Okla. "Because oil is a global commodity, ultimately the current price disparity is unsustainable," they said. "While the time frame for restoring a more normal trading relationship between WTI and other major crudes (most notably North Sea Brent) is uncertain, expect the gap to close as we move through 2009," the analysts said.
Meanwhile, Japan, the world's second-biggest economy, reported Feb. 16 a 3.3% reduction in its fourth quarter economy, its worst performance since 1974.
In other news, Devon Energy Corp. in Oklahoma City has been forced temporarily to curtail production of 80 MMcfd of natural gas and 7,900 b/d of oil and natural gas liquids, 3% of its net production, following a Feb. 11 rupture and fire of a third-party pipeline outside the property line of the Carthage Hub gas processing complex in East Texas. That complex is jointly owned by DCP Midstream LLC and its master limited partnership DCP Midstream Partners LP.
Devon officials said they expect to restore production within 2 weeks.
There was no damage to the natural gas processing complex. At the time of the mishap DCP Midstream employees immediately shut down the plant, blocked in all pipelines feeding the complex. There were no injuries (OGJ Online, Feb. 12, 2009). Company authorities late last week were assessing when the plant would be returned to operation.
The processing complex has a capacity of 780 MMcfd with recent throughput of 550 MMcfd, said company officials. The Carthage Hub has a delivery capacity of 1.5 bcfd. DCP Midstream, operator, owns 75% of the complex with DCP Midstream Partners holding the remainder. DCP Midstream is one of the nation's largest gas gatherers and processors and the largest producer of NGL.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped 64¢ to $41.49/bbl on Feb. 16.
Contact Sam Fletcher at firstname.lastname@example.org.