MARKET WATCH: Oil, gas prices down in uncertain markets

On Apr. 1, the first trading day of the second quarter, front-month crude declined 0.2% in the New York futures market after the Institute for Supply Management reported a dip in its manufacturing index for March. Natural gas also was down 0.2% on forecasts for milder weather.

The ISM index dropped to 51.3 in March from 54.2 in February (OGJ Online, Apr. 1, 2013). Economists previously expected the index to dip to 54. The Oil Service Index and the SIG Oil Exploration & Production Index retreated 1.4% and 0.8%, respectively.

“The broader markets pulled back from all-time highs” on that report with Standard & Poor’s 500 index down 0.5%, said analysts in the Houston office of Raymond James & Associates Inc. Economic data were worse in Asian markets “as Chinese factory output trailed forecasts and Japan's Tankan Index indicated pessimism from large manufacturers,” they said.

On Apr. 2, however, the US Department of Commerce reported orders to US factories jumped to 3% in February from a 1% decline in January, the biggest gain in 5 months. It was attributed primarily to a 95.1% surge in demand for commercial aircraft. But orders for core capital goods of machinery and equipment—indicators of industrial investment plans—fell 3.2%.

Orders for motor vehicles and parts increased 1.4%, DOC said. In separate reports Apr. 2, major automakers said auto sales were up in March, with some reporting the biggest sales since December 2007.

Based on these favorable economic indicators, the Dow Jones Industrial Average climbed 0.6% to a new high in early trading.

Meanwhile, the US Energy Information Administration reported natural gas production from the Lower 48 states dropped to 72.1 bcfd in January, down 670 MMcfd from December and 590 MMcfd from production a year ago. The decline was due in part to “weather-related shut-ins and freeze-offs,” Raymond James analysts said.

In other news, ExxonMobil Corp.’s Pegasus Pipeline from Patoka, Ill., to Nederland, Tex., was shut in following the discovery Mar. 29 of a leak near Mayflower, Ark. “Given an already high level of crude oil inventories in the US Midwest, it is feared that this will only exacerbate the problem as Canadian and Bakken oil production continues to grow,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. ExxonMobil is cleaning up the spill, but there was no accurate information over the weekend of how much oil was spilled. The pipeline has a through-put capacity exceeding 90,000 b/d.

Energy prices

The May contract for benchmark US sweet, light crudes dropped 16¢ to $97.07/bbl Apr. 1 on the New York Mercantile Exchange. The June contract lost 11¢ to $97.38/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 16¢ to match the front-month futures closing of $97.07/bbl.

The new front-month May heating oil rose 2.17¢ to $3.07/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.91¢ to $3.10/gal.

The May natural gas contract slipped 0.9¢ to $4.02/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 1.2¢ to $4.04/MMbtu.

London closing prices for North Sea Brent and gas oil were not available. The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes decreased 26¢ to $106.97/bbl. So far this year, OPEC’s basket price has averaged $109.44/bbl, compared with an average $109.45/bbl for all of 2012.

Contact Sam Fletcher at samf@ogjonline.com.