MARKET WATCH: August crude contract tests $76/bbl in New York

Sam Fletcher
Senior Writer

HOUSTON, July 20 -- The soon-to-expire August contract for benchmark US crudes touched $76/bbl in intraday trading July 19 before closing only slightly below that level in volatile trading on the New York market.

Analysts in the Houston office of Raymond James & Associates Inc. reported crude prices were roughly flat in premarket trading July 20, with the crude contract to expire at the end of the day's trading.

The "widespread sentiment" is that crude prices will continue to increase in the near term, analysts said. "Increased demand above and beyond expectations is now expected to come from China, as economic growth there reached nearly 12% in the second quarter. China, which is the world's second-largest energy consumer, was only able to raise output 1.7% over the same time frame, as opposed to the previous year's increase of 2.1%. Imports have picked up the slack, as a record 14.82 million tons were imported in April alone," Raymond James said.

"On a related note, economic growth in China has been so robust that the Chinese central bank has now raised interest rates for the third time this year in order to moderate inflationary pressures," said Raymond James analysts.

On the other hand, they noted Total SA's Dalia oil field in Angola was able to return to full production of 240,000 b/d just 2 days after two failed turbo generators cut its output in half.

Energy prices
The August contract for benchmark US light, sweet crudes closed at $75.92/bbl, up 87¢ for July 19 on the New York Mercantile Exchange. The September contract advanced by 77¢ to $76.07/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 87¢ to $75.93/bbl. Heating oil for August delivery increased by 0.93¢ to $2.11/gal on NYMEX. However, the August contract for reformulated blend stock for oxygenate blending (RBOB) dipped by 0.39¢ to $2.19/gal.

The August natural gas contract jumped by 17.8¢ to $6.71/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 28¢ to $6.55/MMbtu. The increase was due to the Energy Information Administration's report of a smaller-than-expected injection of 65 bcf of gas into US underground storage in the week ended July 13, said analysts at Enerfax Daily. Forecasts for unusually hot weather in the Northeast and Midwest "led to some short-covering," they said.

In London, the September IPE contract for North Sea Brent crude gained 91¢ to $77.67/bbl. Gas oil for August increased by $4.75 to $655/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes continued climbing, up $1.26 to $73.23/bbl on July 19.

Contact Sam Fletcher at samf@ogjonline.com.