MARKET WATCH: Natual gas price rebounds 6%; oil continues to rally

The front-month natural gas contract rebound 6% Feb. 16 on a bullish inventory report, and crude climbed above $102/bbl in New York as reduced claims for unemployment benefits and new hope for the Greek economy moved the market.

“The US weekly employment report and January’s housing starts data continue to point to a stronger US economic recovery, which kept the market in a bullish mood,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “In addition, the restructuring of Greek debt appeared to have made some progress after recent uncertainties. Consequently, the euro recovered from the recent sell-off, which in turn pushed the oil price higher.”

In Houston, analysts at Raymond James & Associates Inc. said, “Brent crude tacked on a 1% gain to close at an 8-month high in light of supply concerns from the Middle East and the North Sea.”

Zhang said, “The front-end of the Brent structure has gone exponential, with the spread between the first 2 months’ futures contracts exceeding $1/bbl, the widest level for more than 2 months. Meanwhile, the contango at the front-end of the West Texas Intermediate curve flattened slightly due to the supply disruption of Canadian crude.”

The Energy Information Administration reported the withdrawal of 127 bcf of natural gas from US underground storage in the week ended Feb. 10. That reduced working gas in storage to 2.76 tcf, up 817 bcf from the comparable period a year ago and 765 bcf above the 5-year average (OGJ Online, Feb. 16, 2012).

Raymond James analysts said, “The storage surplus simply keeps increasing as total gas in storage is 38% above the 5-year average and quickly approaching a 1 tcf surplus. Excluding weather-related demand, the market was 1.7 bcf looser compared with last year as production continues to build on the oversupply. The forward market is trading at an increasingly steeper contango with storage carry spreads at the highest levels in 2 years, thereby easing the pain felt by customers that elect to carry excess inventories. The most pressing issue is the prospect of mandatory withdrawals for next month, as ratchets and cycling requirements start to kick-in; however, keep in mind that ratchets are negotiable and expect interruptible volumes to be the first to go as we approach the end of heating season.”

Energy prices

The March contract for benchmark US light, sweet crudes increased 51¢ to $102.31/bbl Feb. 16 on the New York Mercantile Exchange. The April contract advanced 50¢ to $102.64/bbl. On the US spot market, WTI at Cushing was up 51¢ to $102.31/bbl.

Heating oil for March delivery increased 1.81¢ to $3.21/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 4.04¢ to $3.05/gal.

The March natural gas contract jumped 14.2¢ to $2.57/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 3¢ to $2.51/MMbtu.

In London, the April IPE contract for North Sea Brent was up $1.18 to $12011/bbl. Gas oil for March dropped $1.75 to $1,004/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 18¢ to $118.13/bbl.

Contact Sam Fletcher at samf@ogjonline.com.