MARKET WATCH: Crude price continues to climb

The front-month futures contract for crude continued to climb Aug. 13 in the New York market after both France and Germany, Europe’s largest economies, both registered 0.3% gains in second-quarter gross domestic products.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Aug. 14 -- The front-month futures contract for crude continued to climb Aug. 13 in the New York market after both France and Germany, Europe’s largest economies, both registered 0.3% gains in second-quarter gross domestic products.

“The price was also helped by a weaker dollar, which continues to share a role with the equities market in directing oil prices,” said analysts in the Houston office of Raymond James & Associates Inc.

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “Lower than expected US retail sales and higher than expected weekly jobless claims put a lid [Aug. 13] on the advance that was triggered early on by France and Germany technically moving out of recession. The retail sales numbers are dollars rather than volume [and] hence will suffer to a certain degree from any deflation, but since dollars fuel growth it is still not possible to spin the retail sales data to the green shoot billboard.”

In New Orleans, analysts at Pritchard Capital Partners LLC said, “Investors decided to take notice of China’s acquisition spree in the commodity and oil patch spaces. If China National Petroleum Corp.’s bid wins for Repsol’s YPF unit, China will have spent $43 billion in 2009 on commodity acquisitions (OGJ Online, Aug. 11, 2009). The Chinese acquisition strategy for crude and commodity assets is likely to continue, which implies there is an underlying bid for any commodity and energy resources not controlled by the US.”

In other news, the Federal Reserve’s Open Market Committee extended for a month its $300 billion program to buy US Treasuries to help the apparent economic rebound (OGJ Online, Aug. 13, 2009).

Natural gas
Raymond James analysts said, “Natural gas continued to fall (down 4%) despite the Energy Information Administration reporting an injection of 63 bcf [into US underground storage], below analyst expectations. This puts domestic storage almost 600 bcf higher year-over-year and at a record 3.152 tcf for this point in injection season. While the report was actually neutral to bullish, gas sold off as traders became less concerned about the developing tropical depression in the Atlantic.”

Jakob reported Aug. 14, “Tropical Depression Two was downgraded late yesterday, but activity has slightly picked up again overnight.” However, he said, “Our main tropical concern is not with Tropical Depression Two but the tropical low just behind it, which is very likely to be upgraded over the weekend. This storm is a concern because the models are putting it on a more southward route then TD2, and it could reach the intensity of a strong hurricane. Tropical forecasting is volatile by nature, but the current activity should deserve a weekend risk premium.”

Pritchard Capital Partners noted, “ExxonMobil Corp. started its new LNG production line in Qatar. Output from the plant is estimated to be 28.5 million metric tons (1.3 tcf). The project is a JV between Qatar Petroleum and ExxonMobil. The US consumes 22 tcf of natural gas a year so the new Qatari production facility could meet 5% of America’s natural gas requirement. US LNG imports are averaging 1 bcfd, and we think the ultimate destination of the LNG coming from the Middle East is Asia and not the US.”

They said, “Apache Corp.’s decision to supply natural gas to Kitimat’s British Columbia planned LNG export terminal indicates a few things: 1. Natural gas prices in Asia may remain higher than in North America. 2. We end up exporting natural gas as LNG from North America, as it seems unlikely North America will be a major import destination for LNG. 3. Natural gas (like oil) will ultimately become more of a global commodity with LNG unifying the different markets.”

Energy prices
The September contract for benchmark US light, sweet crudes rose 36¢ to $70.52/bbl Aug. 13 on the New York Mercantile Exchange. The October contract increased 47¢ to $72.48/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 36¢ to $70.52/bbl. Heating oil for September delivery gained 1.07¢ to $1.90/gal on NYMEX. However, reformulated blend stock for oxygenate blending (RBOB) for the same month dipped 0.61¢ to $2.02/gal.

The September contract for natural gas dropped 14.3¢ to $3.34/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 3¢, also to an average $3.34/MMbtu.

In London, the September IPE contract for North Sea Brent gained 59¢ to $73.48/bbl. Gas oil for September was up $3.25 to $608/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes jumped by $1.18 to $72.22/bbl on Aug. 12.

Contact Sam Fletcher at samf@ogjonline.com.

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