MARKET WATCHTight gasoline market boosts energy prices

Energy prices escalated Apr. 12 on evidence that US gasoline inventories have moved from adequate to tight in less than a month.

Sam Fletcher
Senior Writer

HOUSTON, Apr. 13 -- Energy prices escalated Apr. 12 on evidence that US gasoline inventories have moved from adequate to tight in less than a month.

With the official start of the summer driving season still 45 days away, US demand for gasoline is already at a 5-year high while US stocks of the fuel are at the lowest level since 2001. The front-month crude contract broke through $64/bbl in early trading Apr. 13 in the New York market "as a continued run of refinery outages and seasonal maintenance has led to decreases in gasoline inventories," said analysts at Raymond James & Associates Inc.

Meanwhile, Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, warned, "Nigeria will remain a bull flag for the next 10 days." Election of governors and state house representatives is scheduled this weekend in Nigeria, followed by the presidential election Apr. 21. In a surprise move, the incumbent president declared national holidays Apr. 12-13 to allow voters more time to get to the polls and to prevent Nigeria's supreme court from hearing a suit on disqualification of some candidates, Jakob said.

Energy prices
The May contract for benchmark US light, sweet crudes jumped $1.84 to $63.85/bbl Apr. 12 at the New York Mercantile Exchange. The June contract gained $1.50 to $66.34/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.84 to $63.86/bbl. In London, the May IPE contract for North Sea Brent crude gained 88¢ to $68.72/bbl. "Refinery problems...are affecting a build-up of crude stocks at the NYMEX hub in Cushing, which has put pressure on WTI relative to London Brent crude (an unprecedented $6/bbl difference)," said Raymond James analysts.

The May contract for reformulated blend stock for oxygenate blending (RBOB) escalated by 3.31¢ to $2.19/gal on NYMEX. Heating oil for the same month increased 3.14¢ to $1.91/gal.The May natural gas contract climbed by 6.9¢ to $7.92/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., lost 10¢ to $7.87/MMbtu.

"The official heating season might be over, but heating demand remained alive this week as unseasonably cold weather invaded a majority of the central and eastern US," said Ronald J. Barone with UBS Securities LLC analyst in New York. "With seasonal temperatures in the West making their way inland this weekend, a brief return to more moderate temperatures is expected. Further out, however, the National Weather Service's latest 6-10 day outlook calls for a return of below normal temperatures in the Northeast, Northwest, Southeast, and a majority of the Central US," he said.

Raymond James analysts said, "Many people were short on gas going into the shoulder season and with the onset of the unseasonably cold weather, people are now covering these shorts."

In London, the April gas oil contract was unchanged at $591.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased 30¢ to $63.66/bbl on Apr. 12.

Contact Sam Fletcher at samf@ogjonline.com.

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