MARKET WATCHCrude futures price slips from 2007 high

Crude prices slipped back below this year's high of $59/bbl Feb. 5 after spending the day trying to break through the $60/bbl barrier on the New York market.

Sam Fletcher
Senior Writer

HOUSTON, Feb. 6 -- Crude prices slipped back below this year's high of $59/bbl Feb. 5 after spending the day trying to break through the $60/bbl barrier on the New York market.

Apparently some traders took advantage of the recent rally in crude prices to liquidate their long positions in that market. "We believe there is currently liquidation of some of the speculative length that was put in place during the fourth quarter (and which sweated it out during January)" when prices fell, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Benchmark US light, sweet crude averaged $60.20/bbl on the New York market during the fourth quarter, he said.

"The early move in oil prices, which met some resistance near the $60/bbl level, was tempered by comments from Edmund Daukoru [Nigeria's oil minister and previous president of the Organization of Petroleum Exporting Countries], ruling out further production cuts," said analysts in the Houston office of Raymond James & Associates Inc. "Cold weather, while continuing to blanket the US, is expected to remain in Europe through March. While the market's perception of oil supply risk has diminished since mid-2006, we would expect to see some reemergence of this geopolitical risk premium following the conclusion of the latest strike in Nigeria and leading up to the celebration of the Iranian Revolution on Feb. 11," they said.

Energy prices
After trading as high as $59.95/bbl during the session, the March contract for benchmark US crudes closed at $58.74/bbl, down 28¢ for the day on the New York Mercantile Exchange. Its closing price in the previous session was the highest so far in 2007 on NYMEX (OGJ Online, Feb. 5, 2007). The April crude contract lost 34¢ to $59.39/bbl Feb. 6. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 28¢ to $58.75/bbl. The March contract for reformulated blend stock for oxygenate blending (RBOB) dropped 1.3¢ to $1.56/gal on NYMEX. Heating oil for the same month slipped by 0.84¢ to $1.68/gal.

The March natural gas contract, however, jumped by 15.8¢ to $7.63/MMbtu on NYMEX. On the US spot market at Henry Hub, La., gas was unchanged at $8.16/MMbtu. "On the natural gas front, the prospects of knocking out the year-over-year storage surplus this week remains high. Resilient cold weather throughout the US continues to drive prices higher and could in fact bring the winter ending storage number closer to 1.4 tcf, more bullish than the market's expectations," said Raymond James analysts.

In London, the March IPE contract for North Sea Brent crude lost 31¢ to $58.10/bbl. However, gas oil for February climbed by $15 to $524.50/tonne.

The average price for OPEC's basket of 11 benchmark crudes gained 99¢ to $54.54/bbl on Feb. 5.

Contact Sam Fletcher at samf@ogjonline.com.

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