MARKET WATCHEnergy prices dip with profit taking
Sam Fletcher
Senior Writer
HOUSTON, Apr. 21 -- Energy futures prices slipped Apr. 20 as traders took profits from the recent rally to record highs for crude.
"We anticipate further upsurges in price on concerns of supply disruptions from Iran and Nigeria as well as peak demand from the US in the summer," said analysts in the Houston office of Raymond James & Associates Inc. Meanwhile, the latest report from the US Energy Information Administration of unexpected draws from US inventories of crude, gasoline, and distillates will "put a floor on prices," they said (OGJ Online, Apr. 19, 2006).
Energy prices
The expiring May contract for benchmark US light, sweet crudes dropped 22¢ to $71.95/bbl Apr. 20 on the New York Mercantile Exchange. The new front-month June contract lost 43¢ to $73.69/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 22¢ to $71.96/bbl. Gasoline for May delivery on NYMEX declined by 2.46¢ to $2.21/gal. Heating oil for the same month slipped by 0.87¢ to $2.05/gal.
The May natural gas contract dropped 12.8¢ to $8.06/MMbtu in profit taking on NYMEX after EIA reported a lower-than-expected injection of natural gas into underground storage (OGJ Online, Apr. 20, 2006). "The market had rallied by 20% in the previous four sessions despite little apparent change in fundamentals, driven higher by a spate of record highs in crude [prices] and a surge in natural gas demand due to an April heat-wave in Texas," said analysts at Enerfax Daily.
Meanwhile, a new report from the National Coal Council said advancements in coal conversion technologies could transform abundant US coal supplies into enough natural gas to reduce the country's dependence on LNG imports. The year-long study said US coal reserves—the biggest in the world—could produce 4 tcf/year of natural gas, or some 11 bcfd over the next 20 years.
"Current coal-related technologies such as coal regasification, methanation, and liquefaction, however, are not economically practical and have some ways to go before they can impact the market," said Ronald J. Barone, managing director of equity research for the Natural Gas & Electric Utilities Group of UBS Securities LLC, New York. "Integrated gasification combined cycle (IGCC), on the other hand, is being used with great success to produce natural gas. All in all, the jury is still out," he added.
In London, the May IPE contract for North Sea Brent crude lost 55¢ to $73.18/bbl. Gas oil for May dropped $7 to $633/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes continued to climb, however, up by 33¢ to $67/bbl on Apr. 20.
Contact Sam Fletcher at [email protected].