MARKET WATCH: Energy prices rebound as dollar weakens

March 26, 2012
Energy prices rebound Mar. 23 with most commodities reclaiming much of their losses from the previous trading session as the dollar fell against the euro.

Energy prices rebound Mar. 23 with most commodities reclaiming much of their losses from the previous trading session as the dollar fell against the euro.

“The oil market remains volatile,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “The term structure in Brent also weakened sharply, led by the sell-off in flat prices.”

He said, “Since the beginning of this month, the market has been trading in a range-bound pattern, struggling for direction. Implied volatility has declined substantially since the beginning of this year. We do not expect these relatively calm market conditions to last long as the oil market braces itself for interventions (e.g. a release of strategic oil reserves) or possibly even shocks. The oil market has failed to break out on the upside several times, which may signal the rally that started at the beginning of February is short-term and overly stretched.”

In other news, Federal Reserve Chairman Ben Bernanke said Mar. 26 the US job market remains weak despite 3 months of strong hiring and that the Federal Reserve's existing policies will help boost growth. In a speech to the National Association for Business Economics meeting in Arlington, Va., he said further job gains will likely require more robust consumer and business demand. He indicated the central bank is prepared to keep interest rates near zero until the economy improves substantially.

Meanwhile, the National Association of Realtors’ index of sales agreements declined 0.5% in February to a reading of 96.5 from January's 97 reading, which was the highest since April 2010. A reading of 100 or higher is considered healthy, but the index hasn’t climbed that high since April 2010.

Energy prices

The May contract for benchmark US light, sweet crudes regained $1.52 to $106.87/bbl Mar. 23 on the New York Mercantile Exchange. The June contract rebound by $1.51 to $107.35/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.52 and back in step with the front-month futures contract at $106.87/bbl.

Heating oil for April delivery increased 3.14¢ to $3.21/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 4.5¢ to $3.39/gal.

The April natural gas contract inched up 0.6¢ to $2.28/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5.7¢ to $2.08/MMbtu.

In London, the May IPE contract for North Sea Brent rose $1.99 to $125.13/bbl. Gas oil for April escalated by $15.25 to $1,029/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 98¢ to $122.77/bbl. So far this year, OPEC’s basket price has averaged $117.70/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.