Market watch: Energy prices mixed in international markets
By the OGJ Online Staff
HOUSTON, Mar. 7 -- Futures prices were mixed in international markets Wednesday, with US traders cautiously hopeful that rising demand for gasoline may signal an end to economic recession.
The April contract for benchmark US light, sweet crudes dipped 2¢ to $23.15/bbl on the New York Mercantile Exchange, with the May contract unchanged at $23.45/bbl. In after-hours electronic trading, however, the April oil contract shot up to $23.65/bbl.
Unleaded gasoline for April delivery gained 0.93¢ to 74.03¢/gal, after the American Petroleum Institute and the US Department of Energy both reported US gasoline stocks decreased by 3.1 million bbl last week. Analysts said the drop in gasoline inventories indicates greater demand, lending credibility to perceptions that the economic recession may be easing.
The mild winter also helped boost gasoline demand, which is certain to rise as March moves into spring. Meanwhile, the April contract for heating oil lost 0.21¢ to 59.93¢/gal Wednesday, despite reports of smaller declines in US stocks of that product..
The April contract for natural gas rose 9.9¢ to $2.57/Mcf on NYMEX.
"While (natural gas) storage is on course to exit this winter at a seasonal record high, we also believe it will likely approach 'full' entering next winter," said Robert Morris at Salomon Smith Barney Inc. "Thus, we believe that we can look to no sooner than next winter for the ultimate inflection between supply and demand, with natural gas prices subsequently on course for a longer-term 'normalized' price of around $3.25/MMbtu."
"It typically costs around 3-4¢/Mcf per month to keep gas in storage past the winter, and if the spread between the current spot price and the NYMEX futures contract 8-10 months out can cover this cost, then operators will buy gas to put into storage and sell the December or January futures contract in order to lock in a profit," Morris said.
"The spread between the current spot price and the January NYMEX futures contract is nearly 90¢/MMbtu. Therefore, many operators are just keeping the gas in storage at this juncture and locking in this profit by selling the outer-month futures contract," he said.
In London, North Sea Brent futures fell slightly at the close of trading Wednesday on the International Petroleum Exchange.
The April Brent position lost 7¢ to $22.72/bbl. The April natural gas contract fell 5.8¢ to the equivalent of $2.22/Mcf, well below the comparable NYMEX price.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 6¢ to $21.28/bbl Wednesday.