MARKET WATCHCrude price continues climb to $62/bbl

March 2, 2007
Crude futures prices continued climbing for the seventh consecutive session Mar. 1, with the front-month contract closing at $62/bbl on the New York market.

Sam Fletcher
Senior Writer

HOUSTON, Mar. 2 -- Crude futures prices continued climbing for the seventh consecutive session Mar. 1, with the front-month contract closing at $62/bbl on the New York market.

Such a 7-day stretch of consecutive gains has not occurred "since last year early in the summer," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

Jakob said, "The trading pattern has remained similar over the last 3 days. Crude oil is pulled higher by a very firm gasoline complex and pulled lower by the spillover of the equity scare" from the Feb. 27 sell-off in global stock markets. The sell-off, which took 9% off the China Shanghai Composite Index, resulted in part from the Chinese government's crackdown on speculation that had pushed Chinese stock prices to record levels (OGJ Online, Feb. 28, 2007). The US stock market appeared to rebound in Feb. 28 trading.

There are still fears in some quarters that China's energy demand may be slowing. However, Jakob noted that in January China for the first time became a net importer of coal. That changeover wasn't expected until later this year. Moreover, it represents "a major structural change not only for the global coal trade but for the global energy balances; yet is has gone barely noticed as the numbers came out at the same time as the Shanghai stock exchange collapse," Jakob said. "Chinese power and energy demand is not decreasing, and it would be wrong to discount it on the basis of local stock market gyrations."

Energy prices
The April contract for benchmark US light, sweet crudes climbed by 21¢ to $62/bbl Mar. 1 after trading as high as $62.49/bbl earlier in the day on the New York Mercantile Exchange. The May contract increased by 12¢ to $63.18/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 21¢ to $62.01/bbl. The April contract for reformulated blend stock for oxygenate blending (RBOB) gained 3.63¢ to $1.91/gal on NYMEX. Heating oil for the same month dipped by 0.18¢ but remained essentially unchanged at $1.78/gal.

The April natural gas contract lost 1.2¢ to $7.29/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 11¢ to $7.10/MMbtu after the Energy Information Administration reported the withdrawal of 132 bcf of gas from US underground storage in the week ended Feb. 23. That was below the consensus figure among Wall Street analysts and compared with withdrawals of 223 bcf the prior week and 171 bcf in the same period a year ago. US gas storage is now at 1.7 tcf, down 263 bcf from the year-ago level but still 179 bcf above the 5-year average.

The relatively small withdrawal of gas from storage despite cold weather last week likely was "partly a result of an influx of LNG imports, as India, Korea, Mexico, and Japan are all said to be filled through the month of March. In addition, the price differential in the US is about $4 over prices for LNG in Europe," said analysts in the Houston office of Raymond James & Associates Inc.

Meanwhile, the Wall Street Journal reported Mar. 2 that trading activity is moving from the NYMEX pits to electronic trading. Traditional floor trading accounted for only 22% of the NYMEX trade in crude futures in February, down from 26% in January.

In London, the April IPE contract for North Sea Brent crude gained 22¢ to $62.11/bbl. The March contract for gas oil increased by $7.25 to $545.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes escalated by $1.77 to $58.34/bbl on Mar. 1.

Contact Sam Fletcher at [email protected].