MARKET WATCH: Energy prices decline slightly

Energy prices generally declined Jan. 18, wiping out most of the gains from the Jan. 14 session in the New York market.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 19 -- Energy prices generally declined Jan. 18, wiping out most of the gains from the Jan. 14 session in the New York market.

“Oil traded sideways yesterday despite news of more supply disruptions,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “We expect oil to continue to trade sideways today, with an eye on dollar movement for short-term directions. We are likely to see some volatility…on [Jan. 20] when the February West Texas Intermediate contract expires.”

Royal Dutch Shell PLC shut down its four Brent platforms in the North Sea Jan. 18 “due to an incident investigation,” said Zhang. He noted, “These platforms only produce about 20,000 b/d of oil, forming a very small portion of the underlying physical markets linked to the Brent future contracts.”

Meanwhile, Nigeria's main militant group, the Movement for the Emancipation of the Niger Delta (MEND), indicated a plan to attack downstream oil facilities in that country. “The news helped the oil price to bounce back from its intraday lows,” Zhang reported.

In Houston, analysts at Raymond James & Associates Inc. said, “Despite a weaker dollar, crude prices fell 0.2% yesterday as the Trans-Alaska Pipeline System reopened (OGJ Online, Jan. 18, 2011). Meanwhile, natural gas prices fell 1.2%.” They reported oil and natural gas prices were higher in early trading Jan. 19.

The Dow Jones Industrial Average gained 0.4% Jan. 18 as the Federal Reserve Bank of New York announced an increase in its manufacturing index. “Energy stocks outperformed the broader market,” Raymond James said, “following the positive manufacturing data and an upward revision for global oil demand in the monthly report issued by the International Energy Agency.”

IEA predicted global oil demand will increase by 1.4 million b/d in 2011, while the Organization of Petroleum Exporting Countries earlier forecast a demand increase of 1.2 million b/d. “More importantly, the two organizations came up with very similar numbers on the annual growth of non-OPEC supply, OPEC natural gas liquids, and required OPEC production,” said Zhang.

IEA estimated OPEC’s spare production capacity was just below 5 million b/d in December, while OPEC’s own estimate was 6 million b/d. “Either number looks ample in comparison with the 400,000 b/d of OPEC production increase in 2011 called for by both agencies,” Zhang said.

In other news, the Energy Information Administration’s weekly report of commercial US oil inventories usually released on Wednesdays will be delayed until Jan. 20 because of the Martin Luther King holiday earlier this week.

Energy prices
The February contract for benchmark US light, sweet crudes declined 16¢ to $91.38/bbl on the New York Mercantile Exchange. The March contract lost 26¢ to $92.31/bbl. On the US spot market, WTI at Cushing, Okla., also closed at $91.38, in step with the front-month futures contract. Heating oil for February delivery inched up a minimal 0.07¢ but its rounded closing price was unchanged $2.65/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased 1.54¢ to $2.48/gal.

The February natural gas contract dropped 5.5¢ to $4.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 6.8¢ to $4.48/MMbtu.

In London, the new front-month IPE contract for North Sea Brent crude fell 58¢ from its Jan. 14 close to $97.80/bbl. Gas oil for February gained $8 to $818/tonne.

The average price for OPEC’s basket of 12 reference crudes increased 8¢ to $93.80/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

More in Economics & Markets