MARKET WATCH: Energy commodities recoup some of previous loss
While equity markets weakened for a third consecutive session July 9 due to the troubled Spanish economy and a slowdown in China, energy prices rebound with the front-month crude contract up 1.8% in New York as Norway appeared headed for a midnight shutdown of offshore production in a labor dispute.
Literally at the 11th hour, however, the Norwegian government intervened to force mandatory arbitration between labor and management. As a result, Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, reported Brent crude was down more than $1/bbl when the market opened July 10 but appeared to be inching back to $100/bbl in early trading. “Much of the support after the selloff is on the back of a marginally weaker US dollar,” he said.
“Consistent with action taken in the past, the government stepped in to avoid the lockout and protect economic interests,” said analysts in the Houston office of Raymond James & Associates Inc. Labor and management failed to negotiate a settlement in the 3-week dispute over pensions and retirement. About 10% of offshore workers in Norway have been on strike since June 24, and offshore operators had scheduled a lockout for midnight July 9. “It is estimated that the strike already cut off 13% of Norway's oil production and 4% of the country's gas output,” Raymond James analysts said.
Meanwhile, the front-month natural gas contract rose 3.9% in the New York market on forecasts for warmer temperatures in mid-July. The Oil Service Index and the SIG Oil Exploration & Production Index were up 0.8% and 1% respectively.
“The latest Commodity Futures Trading Commission data indicated net speculative length ended 8 weeks of successive declines, adding a respectable 21.7 million bbl this past week. This was unsurprising, given the supply concerns (European Union sanctions on Iranian oil, and strike activity in Norway),” said De Wet. With the Norwegian strike now ended, he said, “We could see confidence falter in this week’s data.” He expects oil prices to remain range-bound in July 10 trading.
Energy prices
Energy commodities generally regained some of their losses from the previous session. The August and September contracts for benchmark US sweet, light crudes climbed $1.54 each to $85.99/bbl and $86.37/bbl, respectively, July 9 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was up $1.54 to match the front-month futures contract’s closing at $85.99/bbl.
Heating oil for August delivery increased 3.91¢ to $2.75/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 4.34¢ to $2.76/gal.
The August natural gas contract gained 10.7¢ to $2.88/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., dropped 10.4¢ to $2.82/MMbtu.
In London, the August IPE contract for North Sea Brent recouped $2.13 to $100.32/bbl. Gas oil for July was up $5 to $873.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dipped 1¢ to $96.92/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.