Oil prices continued falling Apr. 12 with crude down 1.5% through last week on the New York market. Natural gas, however, continued its rally, up 2% for the week.
Crude and other commodities declined sharply in early trading Apr. 15 “as weak US retail sales and consumer confidence numbers prompted a rethink about the health of the global economy and, consequently, the health of global commodity demand,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.
In Houston, analysts with Raymond James & Associates Inc. projected the price spread between West Texas Intermediate and North Sea Brent will narrow this year and then widen again in 2014.
The WTI-Brent spread “blew out well above any transportation cost metric about 2½ years ago and has never really looked back”—until recently, they said. “With the recent expansion of the Seaway pipeline, more rail bypassing Cushing, Okla., and the imminent start-up of more Permian and Cushing pipelines, we are finally starting to see the bloated WTI-Brent spread begin to shrink,” Raymond James analysts reported. “While pipeline start-up timing is always questionable, our most recent math now suggests that the Cushing bottleneck should mostly be alleviated by late summer or early fall of 2013. That means the WTI-Brent spread should continue to shrink though the summer of 2013.”
Therefore, they reduced their 2013 WTI-Brent spread forecast to $10/bbl for the last half of the year from their previous outlook of $20/bbl. “While consensus spread expectations call for this $10/bbl spread to continue through 2014, we still think the WTI-Brent spread will widen again in 2014 as limits of Gulf Coast refining capacity drive a widening Louisiana Light Sweet to Brent spread,’ Raymond James analysts said.
Energy prices
The May contract for benchmark US light, sweet crudes dropped $2.22 to $91.29/bbl Apr. 12 on the New York Mercantile Exchange—“its lowest close since early March,” Ground reported. The June contract fell $2.24 to $91.61/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down $2.22 to $91.29/bbl.
Heating oil for May delivery declined 2.73¢ to $2.87/gal on NYMEX. Reformulated stock for oxygenate blending for the same month lost 2.92¢ to $2.80/gal.
However, the May natural gas contract climbed 8.3¢ to $4.22/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 9.5¢, also closing at a rounded $4.22/MMbtu.
In London, the May IPE contract for North Sea Brent was down $1.16 to $103.11/bbl, its lowest close since July. The new front-month May contract for gas oil fell $26 to $856/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped $1.81 to $100.63/bbl. So far this year, OPEC’s basket price has averaged $108.73/bbl, down from an average $109.45/bbl for all of 2012.
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.