MARKET WATCH: Gas price rises as crude closes flat

Natural gas prices for December delivery gained in trading Nov. 23 as crude oil closed “flattish after failing to surpass $80[/bbl] resistance as a bullish October home sales report was tempered by a weak dollar,” said analysts at Raymond James & Associates Inc.

Nov 24th, 2009

By OGJ editors
HOUSTON, Nov. 24
-- Natural gas prices for December delivery gained in trading Nov. 23 as crude oil closed “flattish after failing to surpass $80[/bbl] resistance as a bullish October home sales report was tempered by a weak dollar,” said analysts at Raymond James & Associates Inc.

Meanwhile, they said, “Henry Hub cash prices surpassed a 2-week high as the 6 to 10-day temperature outlook calls for a colder-than-normal [Thanksgiving] Day weekend in southeastern states.”

Barclays Capital analysts noted, “Yesterday brought no change to the recent trading pattern in oil markets, whereby prices continue to trade sideways in a very tight range.” They added, “Since the beginning of November, prices have traded within the bounds $75.57-81.06[/bbl], with the highest and lowest closing price being $80.40[/bbl] and $76.35[/bbl].

They said, “Yesterday’s price action saw the front-month WTI contract [for January delivery] gaining…. On the fundamental side the newsflow was largely positive; final trade data from China have continued to point to extraordinary domestic demand growth, with apparent oil demand in October up by more than 11% [year-to-year].
In the afternoon, positive macro data from the US, showing existing home sales surging 10.1% [month-to-month], helped cement the positive sentiment.”

Barclays Capital analysts added, “At the same time the potential upside appears to be constrained by expectations surrounding OPEC policy, amid signs sent by the producing Group that it could change its output policy should prices start to push significantly above current levels. Given this framework, we believe prices will most likely continue to trade sideways for the time being.”

Meanwhile, the Centre for Global Energy Studies, in a Nov. 24 Global Oil Insight Weekly Outlook, said, “Few signs emerged last week to suggest that oil prices are ready to move into the $80-90/bbl range, leaving the CGES confirmed in its view that WTI is slightly overbought at levels above $75/bbl, given that the economic recovery has yet to gather pace and that the over-exuberant expectations underpinning the forward curve still require some explanation.”

CGES reported, “During US President Barack Obama’s visit to China last week a whole range of issues was discussed, two in particular being of relevance to the oil market. One of the main topics was climate change, in the context of the Copenhagen conference next month. Over the past few weeks the prospect of achieving a binding treaty involving the main economies has all but vanished.”

CGES said, “Obama’s meeting with his Chinese counterpart, Hu Jintao, did nothing to disabuse this notion and, although the Chinese government still remains ostensibly committed to reducing China’s greenhouse-gas emissions per unit of [gross domestic product], this is a far cry from signing up to binding carbon dioxide targets. For the oil market, this is a sign that it will be some time before costly additional restrictions are widely imposed on fossil fuel-related activities.”

Energy prices
The new front-month January contract for benchmark US light, sweet crudes closed at $77.56/bbl Nov. 23, up 9¢ on NYMEX. The February contract rose 20¢ to close at $78.50/bbl. On the US spot market, WTI at Cushing, Okla., was down 16¢ to $76.56/bbl. Heating oil for December delivery was unchanged at $1.98/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month also was unchanged, closing at $1.98/gal.

The December natural gas contract, however, rose 5¢ to $4.47/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., shot up 58¢ to $3.765/MMbtu.

In London, the January IPE contract for North Sea Brent crude increased 26¢ to $77.46/bbl. Gas oil for December closed at $628.25/tonne, up $19.

The average price for OPEC’s basket of 12 reference crudes was up 95¢ to $76.73/bbl on Nov. 23.

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