MARKET WATCHApril crude contract hits 9-week high

Crude prices continued climbing to a 9-week high Feb. 26 but slipped below $61/bbl in early trading Feb. 27 on the New York market.

Feb 27th, 2007

Sam Fletcher
Senior Writer

HOUSTON, Feb. 27 -- Crude prices continued climbing to a 9-week high Feb. 26 but slipped below $61/bbl in early trading Feb. 27 on the New York market.

"There has been no fundamental change [in market conditions], and we believe the dip could be a result of profit taking, as prices have been on a tear for the last week and a half," said analysts in the Houston office of Raymond James & Associates Inc.

Nevertheless, it marked "the first time this year that a Monday closed positive as well as the first time this year we had four consecutive up days" in crude trading in that market, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Expiration of the March natural gas contract "was a weight" on Feb. 26 trading in the New York market, "and the complex will now have to go through the expiry of heat and gasoline tomorrow," he said Feb. 27.

Still, Jakob said, "The oil complex is well supported by the short term moving average [of commodity prices over a given period] and the momentum is confirmed further, only lacking the higher highs and lows on crude oil." He said, "Crude oil is trading above all the main moving averages apart from the 200-day moving average" of benchmark US crudes on the New York Mercantile Exchange.

Meanwhile, permanent members of the United Nations Security Council and Germany began talks Feb. 26 about further sanctions against Iran for its refusal to suspend its nuclear program. On Feb. 27, Iran's Foreign Minister Manouchehr Mottaki said his country would never again suspend uranium enrichment, as the UN wishes. However, he said Iran is willing to negotiate about its nuclear program "without any preconditions." Iran suspended its uranium enrichment program in 2003 during negotiations with Britain, France, and Germany, but it resumed the program in January 2006.

Energy prices
The April contract for benchmark US sweet, light crudes gained 25¢ to $61.39/bbl Feb. 26 on NYMEX. The May contract increased by 18¢ to $62.53/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., jumped up 87¢ to $61.40/bbl. Heating oil for March delivery inched up by 0.57¢ to $1.76/gal on NYMEX. The March contract for reformulated blend stock for oxygenate blending (RBOB) escalated by 1.46¢ to $1.78/gal.

The expiring March natural gas contract fell by 20.8¢ to $7.55/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was unchanged at $7.56/MMbtu.

"On the natural gas front, the natural gas overhang has dissipated thanks to a continuation of cold weather, and we are now at a year-over-year storage deficit of 296 bcf," said Raymond James analysts. "Colder-than-normal weather was recorded last week and will drive this week's withdrawal number. However, looking forward it appears as if warmer weather is on the forecast. This warm weather may very well be short lived, but either way we are comfortable with our estimate of winter-ending storage trending back towards normal levels. This warm weather is most likely responsible for the nearly 21¢ drop in natural gas prices yesterday and the reason why natural gas was down nearly 16¢" in pre-market trading Feb. 27.

In London, the April IPE contract for North Sea Brent crude advanced by 45¢ to $61.33/bbl. Gas oil for March gained $1.75 to $541.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 53¢ to $56.94/bbl on Feb. 26.

Contact Sam Fletcher at samf@ogjonline.com.

More in General Interest