MARKET WATCHEnergy prices mixed at end of bearish week

Sept. 18, 2006
Energy prices were mixed Sept. 15, with the front-month crude contract inching up slightly in the New York market.

Sam Fletcher
Senior Writer

HOUSTON, Sept. 18 -- Energy prices were mixed Sept. 15, with the front-month crude contract inching up slightly in the New York market.

The Organization of Petroleum Exporting Countries "continues to imply its willingness to defend" a $60/bbl floor price for crude, "now citing high prices and slower growth, especially in Europe and the US as reasons for a potential future cut" in production, said analysts in the Houston office of Raymond James & Associates Inc.

"On the gas front, last week's price meltdown below the $5/Mcf range was precipitated by a very bearish injection number," Raymond James analysts said. The US Energy Information Administration reported the injection of 108 bcf of gas into US underground storage during the week ended Sept. 8, the first triple-digit increase since June 3, 2005 (OGJ Online, Sept. 14, 2006). The US celebrated the Labor Day holiday on Sept. 4; Natural gas injections usually increase during Labor Day week because power plants' demand for gas is curtailed because of closed offices and factories. US gas storage now exceeds 3 tcf, marking the earliest time by 2 weeks that US gas storage has passed the 3 tcf mark,

That latest report from EIA "implied a radical shift in the supply-demand balance from the preceding 6 months, which quite frankly we find somewhat suspicious," Raymond James analysts said. "As such, our call going forward is that there remains a great deal of uncertainty in the near-term gas picture. Can storage handle 3.5 tcf, which is where it appears that we are headed? We believe that this is roughly the current storage capacity, and that gas will reset in November," they said.

Energy prices
The October contract for benchmark US light, sweet crudes gained 11¢ to $63.33/bbl Sept. 15 on the New York Mercantile Exchange. The November contract, however, dropped 9¢ to $64.02/bbl. Unleaded gasoline for October delivery increased by 2.28¢ to $1.58/gal. But heating oil for the same month declined 0.87¢ to $1.70/gal. The October gas contract was up by 9¢ to $4.98/MMbtu.

In London, the November IPE contract for North Sea Brent crude lost 21¢ to $63.33/bbl, the same closing price as front-month US crudes on NYMEX the same day. Gas oil for October fell by $7 to $544.75/tonne.

The average price for OPEC's basket of 11 benchmark crudes dropped 78¢ to $58.44/bbl on Sept. 15. So far this year, OPEC's basket price has averaged $63.08/bbl, up from an average $50.64 for all of 2005.

Contact Sam Fletcher at [email protected].