Market Watch, Nov. 15

Forecasts of colder weather and historically low heating oil stocks kept energy futures prices on an upward climb on the New York Mercantile Exchange Tuesday.


Forecasts of colder weather in the US Midwest and Northeast, coupled with historically low levels of heating oil, kept upward momentum in energy futures prices on the New York Mercantile Exchange (NYMEX) Tuesday.

Although some analysts remained skeptical about the accuracy of weather forecasts, traders seemed to believe that the US Midwest and Northeast would be facing temperatures 10� below the average for this time of the year. With heating oil stocks low, the possibility of lower temperatures and possible shortages of the product affected the market.

After the end of the trading session, the American Petroleum Institute released its weekly inventory report, indicating that the nation�s crude stocks rose by 2.52 million bbl during the previous week, while gasoline inventories added 3.42 million bbl.

NYMEX sweet, light crude, the American benchmark, rose by 40� to finish at $34.87/bbl for December delivery, while the January contract stood at $33.96, also up by 40�. Refined petroleum products also closed higher, with December home heating oil rising by 3.78� to finish at 105.41�/gal, while unleaded gasoline for the same month advanced by 0.71� to settle at 89.23�.

NYMEX natural gas for December delivery surged 31.8� to end at $6.02/Mcf of gas. Home heating oil led the market, as it shot up on forecasts of colder-than-normal weather during the rest of the month. However, distillate stocks, which include home heating oil, declined by 55,000 bbl during the same period.

In after-hours electronic access trading in New York, WTI brought $35.13/bbl for the December position and $34.21 for the January contract, both up from the NYMEX close.

Meanwhile, in London Tuesday, North Sea Brent crude oil futures rallied on the International Petroleum Exchange (IPE), as the whole energy complex was dragged higher by soaring NYMEX natural gas and home heating oil values. On the IPE, the December natural gas contract settled at the equivalent of $4.17/Mcf, up 8�.

Brokers said reports of severe cold weather passing across the north of the US had encouraged active buying of natural gas and heating oil futures. Consumers were already experiencing substantially higher prices in the US, and these were likely to rise further, given the low levels of stocks and forecasts of further severe weather to come in the next few weeks, they said. On Tuesday, IPE December Brent futures settled at $32.15/bbl, up by 50� from the previous close. The price of the OPEC basket of seven crudes stood at $31.85/bbl Tuesday, compared with $31.54 the previous day.

More in Economics & Markets