MARKET WATCH: Oil, gas prices rebound with Mideast conflict
Crude oil and natural gas prices rebound Oct. 4, wiping out most of—and often more than—the losses in the previous session as Turkey considered a stronger military response against Syria following a fatal attack on civilians in the Turkish town of Akcakale near the Syrian border.
“This has raised concern that the Kirkuk-Ceyhan pipeline (which transports oil from Iraq) will be affected as it runs through southern Turkey near the Syrian border. From a more general geopolitical risk perspective, this development has also heightened concerns that more countries in the region get drawn into Syria’s civil war,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.
Turkish military forces shelled Syrian targets Oct. 3-4 in response to a mortar shell fired across the border that killed civilians in Turkey. “The spillover of Syria's violence into Turkey is not new, but Turkey's swift retaliation indicates that its rules of engagement have changed dramatically following similar provocations by Syria in the earlier days of the Syrian civil war,” said analysts in the Houston office of Raymond James & Associates Inc. (OGJ Online, Oct. 4, 2012).
In New York, the front-month contract for benchmark US crude shot up 4.1% “as positive economic data was compounded by increased Middle East supply risk premium amid the cross-border fighting,” Raymond James analysts reported. “Despite the bearish Energy Information Administration injection report, natural gas futures traded slightly higher (up 0.3%) for the eighth time in 9 days as forecasts again signal for cold weather.”
EIA reported the injection of 77 bcf of natural gas into US underground storage in the week ended Sept. 28, exceeding the Wall Street consensus for 73 bcf. That raised working gas in storage to 3.653 tcf, up 272 bcf from a year ago and 281 bcf above the 5-year average (OGJ Online, Oct. 4, 2012).
Market confidence in the euro was bolstered when European Central Bank Pres. Mario Draghi reiterated commitment to the common currency. “This in turn has lent support to commodities in general via a weaker dollar,” said Ground. However, crude prices were down and natural gas was flat in early trading Oct. 5.
Ground said, “Today the market is looking to US non-farm payrolls. Analysts are expecting a 115,000 increase in [in jobs during] September, compared [with] the 96,000 increase seen in August. We expect that a disappointing number could help lift commodity prices on the basis of what this implies for QE3 [the Federal Reserve’s third round of quantitative easing to stimulate the economy].Crude oil should benefit from such a rising tide, despite the demand implications of a weaker-than-expected US labor market.”
Energy prices
The November contract for benchmark US light, sweet crudes regained most of its loss from the previous session, rising $3.57 to $91.71/bbl Oct. 4 on the New York Mercantile Exchange. The December contract reclaimed $3.55 to $92.07/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $3.57 to $91.71/bbl.
Heating oil for November delivery jumped 12.2¢ to $3.19/gal on NYMEX, negating its cumulative loss of 9.28¢/gal since Oct. 1 when it became the front-month contract. Reformulated stock for oxygenate blending for the same month shot up 14.34¢ to $2.94/gal, offsetting its earlier total loss of 12.07¢/gal.
The November natural gas contract took back 1.1¢ to $3.41/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 2.3¢ to $3.23/MMbtu.
In London, the November IPE contract for North Sea Brent jumped $4.41 to $112.58/bbl. Gas oil for October escalated $20.25 to $979/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes continued to slip, however, down 9¢ to $106.99/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.