MARKET WATCH: Oil prices slip lower in 'uneventful' markets
Oil prices declined early in the Oct. 18 session until encouraging US economic data released later in the day reduced losses to minimal levels in “largely uneventful” trading.
Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “Oil markets preoccupied with high US inventory levels and demand destruction were encouraged by indications of a firming US economy” from the latest Philadelphia Federal Reserve Bank report and other data.
As a result, the front-month US benchmark crude contract recovered most of its earlier losses, ending the day essentially flat. However, North Sea Brent’s recovery was “more muted,” Ground said.
“The absence of any attention-grabbing headlines out of the Middle East this week (in particular, Iran and Syria) has weakened the geopolitical risk premium that Brent is pricing in,” he said. “This is notable in the narrowing of the West Texas Intermediate-Brent spread.” After reaching a record $23.95/bbl Oct. 15, the premium narrowed to $20.32/bbl Oct. 19 with the price of Brent dropping $3.63/bbl over three sessions while WTI gained a modest 25¢/bbl.
Ground said, “An easing of concerns over the Turkish-Syrian conflict and the potential for increased US crude demand could see a further narrowing of the WTI-Brent spread over the near term. However, we do feel that Middle East tensions remain significant enough to keep the spread from closing too dramatically. Barring any major positive developments in Syria or Iran, we don’t feel the premium could move sustainably below the $15/bbl low of this year over the next quarter.”
In other news, TransCanada Corp. shut down its 2,100-mile Keystone XL Pipeline Oct. 17 to check possible safety issues. After finding no leaks in the pipeline transporting Canadian crude into the US, the company plans to restart it Oct. 20. That news undercut crude prices in early trading Oct. 19.
Energy prices
The November contract for benchmark US light, sweet crudes slipped 2¢ to $92.10/bbl Oct. 18 on the New York Mercantile Exchange. The December contract dipped 6¢ to $92.53/bbl. On the US spot market, WTI at Cushing, Okla., was down 2¢ to $92.10/bbl.
Heating oil for November delivery declined 0.28¢ but closed essentially unchanged at a rounded $3.19/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 3.66¢ to $2.75/gal.
The November natural gas contract jumped 11.7¢ to $3.59/MMbtu on NYMEX with colder weather forecast calling for the Northeast. On the US spot market, gas at Henry Hub, La., gained 2.7¢ to $3.30/MMbtu.
In London, the December IPE contract for North Sea Brent fell 80¢ to $112.42/bbl. Gas oil for November was down 25¢ to $996.50/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes retreated 47¢ to$109.77/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.