MARKET WATCH: New York crude inches up to March high

The price of crude inched up marginally Mar. 11 with the front-month contract posting its highest closing since February on the New York market.

North Sea Brent didn’t fare as well, however, posting its second consecutive loss. “Yesterday’s closing prices left the Brent-West Texas Intermediate spread at $18.16/bbl, its lowest level since the end of January during the height of the Seaway Pipeline optimism,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. Crude and natural gas were up in early trading Mar. 12, but petroleum products were mixed.

Ground reported, “US demand optimism continues to drive WTI, while global demand considerations as well as an uncertainty over possible changes to South Korean oil import-export taxes have weighed on Brent. The outlook for US demand is…particularly promising, much better than we had expected at the beginning of the year. However, we remain concerned about the effect that the past and future fiscal hurdles will have on the economy and ultimately oil demand. That said, it appears as if consumer and business confidence were largely unaffected by the debt ceiling stand-off that ended last year, and the economy has remained relatively robust after the related payroll tax hikes that heralded the start of this year. Therefore, the US economy might prove just as resilient in the face of the sequester [of US federal funds] and upcoming future fiscal hurdles.”

Broader markets were up Mar. 11 with the Dow Jones Industrial Average posting its “seventh consecutive increase and fourth record high,” said analysts in the Houston office of Raymond James & Associates Inc. They reported, “Fear has seemingly left the markets as the volatility index dropped to 11.56, the lowest level in 6 years. The lower volatility index and market rise occurred despite weaker Chinese economic data over the weekend, which showed both industrial production and retail sales growing slower than expected.”

In its monthly Oil Market Report, the Organization of Petroleum Exporting Countries said a rise in oil prices during February was “accompanied by a surge in managed money net-long positions, which were within sight of last year’s peak.” But toward the end of February, OPEC ministers said, “The optimistic mood began to erode due to concerns over the health of the global economy.”

OPEC’s estimate of world oil demand growth in 2012 “remains almost unchanged” at 800,000 b/d despite a downward revision of 100,000 b/d in the fourth quarter. Its demand grown outlook for this year remained steady, also at 800,000 b/d.

“The large portion of this growth is seen coming from China, followed by the Middle East, other [parts of] Asia, and Latin America,” OPEC officials said. In contrast, they expect demand among members of the Organization for Economic Cooperation and Development to fall, but less than last year. “However, the current forecast foresees a number of potential downward risks,” they said.

They expect world oil supplies from outside of OPEC to increase 1 million b/d this year, following growth of 600,000 b/d in 2012. The 2013 forecast is up 100,000 b/d from the previous month’s outlook primarily because of forecast revisions for the US, Canada, Mexico, Syria, and the Sudans.

Estimated demand for OPEC crude for last year remained unchanged at 30.1 million b/d, indicating a decline of 100,000 b/d from 2011. This year, demand for OPEC crude is expected to average 29.7 million b/d, a drop of 400,000 b/d from last year and a downward adjustment of 100,000 b/d from the previous report.

Energy prices

The April contract for benchmark US sweet, light crudes inched up 11¢ to $92.06/bbl Mar. 11 on the New York Mercantile Exchange. The May contract rose 9¢ to $92.52/bbl.

On the US spot market, WTI at Cushing, Okla., was up 11¢ to $92.06/bbl. Heating oil for April delivery slipped 0.58¢ to $2.97/gal on NYMEX. Reformulated stock for oxygenate blending for the same month fell 5.11¢ to $3.15/gal.

The April natural gas contract gained 2¢ to $3.65/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 10.2¢ to $3.68/MMbtu.

In London, the April IPE contract for Brent dropped 63¢ to $110.22/bbl. Gas oil for March increased 50¢ to $925/tonne.

The average price for OPEC’s basket of 12 benchmark crudes declined 10¢ to $106.96/bbl.

Contact Sam Fletcher at samf@ogjonline.com.