MARKET WATCH: Oil prices continue climbing as gas price drops
Oil prices continued rising with the front-month crude contract up 0.9% in the New York futures market May 16 despite a report from the US Department of Labor showing a rise in claims for unemployment benefits, stimulating worries about economic recovery.
The front-month natural gas contract, however, was “beaten down by a negative storage report and lost 3.4%,” said analysts in the Houston office of Raymond James & Associates Inc.
The Standard & Poor’s 500 Index was down 0.5%, closely followed by the SIG Oil Exploration & Production Index and the Oil Service Index, down 0.9% and 0.1%, respectively.
Barclays Capital Commodities Research analysts expect North Sea Brent “to continue hovering around the relatively weak $100/bbl range due to short-term lack of upward catalysts.” They said, “Retracement is now in sight, however, as tail end of the second quarter approaches. Gas prices regained the $4/MMbtu level early this week but came under pressure again…after the bearish storage injection.”
They also reported, “Exports of US gas to Mexico have doubled in the past 3 years. Continued growth of Mexican gas demand, coupled with a wave of pipeline capacity expansions, promises to siphon increasing amounts of gas from the US.”
US inventories
The Energy Information Administration reported the injection of 99 bcf of natural gas into US underground storage in the week ended May 10, exceeding Wall Street’s consensus for 94 bcf input. That increased working gas in storage to 1.964 tcf, down 694 bcf from the comparable period a year ago and 83 bcf below the 5-year average (OGJ Online, May 16, 2013).
With the storage deficit decreasing to 694 bcf for the year, gas prices have fallen from the highs of mid-April. “Some believe that prices are set to fall even further; however, in order to refill storage inventories to the 3.8-3.9 tcf level, we need the market to run 4 bcfd looser through the summer,” Raymond James analysts said. “While [the latest] number implies that the market was 5.7 bcfd looser, we fully expect that prices need to sustain the $4/Mcf level to spur enough gas to coal switching and fill up storage inventories.”
Energy prices
The June contract for benchmark US light, sweet crudes gained 86¢ to $95.16/bbl May 16 on the New York Mercantile Exchange. The July contract climbed 89¢ to $95.45/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 86¢ to $95.16/bbl.
Heating oil for June delivery increased 2.86¢ to $2.91/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 1.52¢ to $2.88/gal.
However, the June natural gas contract fell 13.8¢ to $3.93/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was unchanged at $4.01/MMbtu.
In London, the June IPE contract for Brent was up 12¢ to $103.80/bbl. Gas oil for June jumped $25 to $871.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained $1.19 to $100.85/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.