MARKET WATCH: Energy prices climb in unsteady market

July 20, 2012
Energy prices escalated July 19 as traders shrugged off disappointing economic data early in the sessions. Crude gained 3% in the New York market amid continued concerns over unrest in the Middle East, and natural gas increased 1%.

Energy prices escalated July 19 as traders shrugged off disappointing economic data early in the sessions. Crude gained 3% in the New York market amid continued concerns over unrest in the Middle East, and natural gas increased 1%.

Earlier reports showed sales of existing homes dropped 5.4% in June to the lowest level of the year, while initial claims for unemployment benefits rose sharply to 386,000, last week, exceeding the consensus forecast of 365,000. “On the other hand, the markets were provided some relief from earnings results as a wave of companies beat bottom line estimates despite missing top line projections,” said analysts in the Houston office of Raymond James & Associates Inc. The SIG Oil Exploration & Production Index and the Oil Service Index mirrored broader markets, up 1% each for the day.

However, markets fell in early trading July 20 as the European economic crisis bubbled over again. Other Euro-zone members officially approved the bailout of Spain’s troubled banks, but investors remain unsatisfied. The country’s benchmark stock index dropped 6% while the government’s borrowing costs climbed above 7%. Italy's borrowing costs also increased as the debt crisis spread to that country his country.

In the US, the US Department of Labor said unemployment rates increased in 27 states through June, the biggest spread in nearly a year. US employers created only 80,000 new jobs in June, the third consecutive month of weak growth. US unemployment remains stuck at 8.2%. Other data indicated a slowdown in demand growth for automobiles in the first weeks of July.

Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, reported, “Some support for Brent has come from better-than-expected gasoline demand in the US and a higher [price for] West Texas Intermediate. Short-covering of crude futures positions helped push Brent above $107/bbl July 19, but De West questions “the sustainability of a rally beyond this level in the face of more dollar strength and economic data releases that may yet again disappoint on the downside.” He said, “As a result, we believe that from $107/bbl, on a risk-return basis, there is little value in adding new longs.”

Energy prices

The August contract for benchmark US light, sweet crudes climbed $2.79 to $92.66/bbl July 19 on the New York Mercantile Exchange. The September contract jumped $2.80 to $92.97/bbl. On the US spot market, WTI at Cushing, Okla., was up $2.79 to $92.66/bbl.

Heating oil for August delivery gained 6.94¢ to $2.95/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 5.55¢ to $2.94/gal.

The August natural gas contract increased 2.6¢ to $3/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., bumped up 13¢ to $2.99/MMbtu.

In London, the September IPE contract for North Sea Brent climbed $2.64 to $107.80/bbl. Gas oil for August escalated $19.50 to $925.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.98 to $103.71/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.