MARKET WATCH: Energy prices decline; WTI-Brent spread widens

July 23, 2013

Weak economic data, including disappointing housing sales, weighed down crude oil prices July 22 with front-month crude declining 1.1% in the New York market. Forecasts of cooler weather, meanwhile, dropped the front-month natural gas contract 3%.

Sam Fletcher

North Sea Brent increased slightly, however, triggering a dramatic reversal of the narrowing spread between it and West Texas Intermediate. The spread rose to $1.24/bbl July 22 from 2¢/bbl in the previous session, which had been the smallest spread since 2010.

“The ostensible catalyst for yesterday’s drop in the US benchmark was disappointing US economic data flow, most notably existing home sales numbers, which showed a 1.2% month-to-month decline for June—expectations had been for a 1.5% increase,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Adding to the negative sentiment was the downward revision of May’s increase from 4.2% to 3.4%. With a housing market improvement still key to a recovery in the overall economy, these numbers sparked a questioning of the US oil demand optimism that has driven WTI prices so hard over the last month.”

In the equity market, the SIG Oil Exploration & Production Index was down 0.9%, while the Oil Service Index dipped 0.3%.

Energy prices

After registering gains early in the session, the August contract for benchmark US sweet, light crudes fell $1.14 to $106.91/bbl July 22 on the New York Mercantile Exchange. The September contract dropped 93¢ to $106.94/bbl. Subsequent monthly contracts posted sequentially lower prices through the first quarter of 2014. On the US spot market, WTI at Cushing, Okla., trailed the front-month futures contract down $1.14 to $106.91/bbl.

Heating oil for August delivery declined 2.3¢ to $3.07/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 6.83¢ to $3.06/gal.

The August natural gas contract lost 11.2¢ to $3.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., retreated 9.6¢ to $3.70/MMbtu.

In London, the September IPE contract for North Sea Brent was up 8¢ to $108.15/bbl. Gas oil for August dropped $7.25 to $918.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 26¢ to $106.14/bbl.

Contact Sam Fletcher at [email protected].

About the Author

Sam Fletcher | Senior Writer

I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.