MARKET WATCH: Crude price climbs from 7-week low

Front-month crude inched higher July 9, ending a six-session losing streak, after dropping below $60/bbl to a 7-week low in intraday trading on the New York market.

Sam Fletcher
OGJ Senior Writer

HOUSTON, July 10 -- Front-month crude inched higher July 9, ending a six-session losing streak, after dropping below $60/bbl to a 7-week low in intraday trading on the New York market.

“Oil rose in response to better economic data,” said analysts at Pritchard Capital Partners LLC, New Orleans.

The US Department of Labor said July 9 initial claims for jobless benefits last week dropped below 600,000 for the first time since late January. However, continuing claims jumped up 159,000 to 6.88 million, the highest since recording began in 1967 (OGJ Online, July 9, 2009).

Also, the US dollar retreated sharply against the euro and British pound, prompting investors to buy oil at lower prices resulting from its recent losing streak. Pritchard Capital Partners observed, “A weak dollar could be the best support for crude and commodities, and discussions of a second US stimulus package may weigh on the US dollar.”

In other news, ExxonMobil Corp. reported positive flow rates from its British Columbia's Horn River basin shale gas play. The company's first wells in the play came online at 16-18 MMcfd, ahead of expectations. “However, from a broader industry standpoint, a new ‘Haynesville look-alike’ (which this appears to be) is probably the last thing that North America's already oversupplied gas market needs these days,” said analysts in the Houston office of Raymond James & Associates Inc.

The Energy Information Administration earlier reported the injection of 75 bcf of natural gas into US underground storage in the week ended July 3. That increased the amount of working gas in storage to 2.796 tcf. That’s up 601 bcf from year-ago levels and 452 bcf above the 5-year average.

Latest information indicates the Organization of the Petroleum Exporting Countries increased crude production by 80,000 b/d to 28.47 million b/d in June, exceeding the official quota of 24.845 million b/d since Jan. 1 for all members except Iraq.

On July 10, the International Energy Agency in Paris predicted rising consumption in emerging economies will increase global demand for crude by 1.7%, or 1.4 million b/d, to 85.2 million b/d in 2010. Meanwhile, it reported oil inventories increased worldwide in May, particularly in North America, Europe, and the Pacific, to the equivalent of 62.5 days of forward cover.

Raymond James analysts said, “IEA is now calling for positive non-OPEC production growth in 2009, with production increasing by 190,000 b/d. Additionally, the agency is forecasting non-OPEC production will grow again in 2010, up 410,000 b/d. The production growth is expected to be driven by higher volumes from Russia, Brazil, and Canada among others.”

They said, “Overall, the report was a mixed bag with both bullish and bearish data points. However, we remain skeptical about such a large rebound in oil demand in 2010 and non-OPEC's ability to grow production going forward. For instance, we are looking for demand to be relatively flat in 2010 at 82.9 million b/d and non-OPEC supply to decline by 2% in 2010.”

Energy prices
The August contract for benchmark US light, sweet crudes fell to a 7-week low of $59.25/bbl in intraday trading July 9 on the New York Mercantile Exchange before climbing to a close of $60.41/bbl, up 27¢ for the day. The September contract gained 33¢ to $61.49/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $27¢ to $60.41/bbl. Heating oil for August delivery slipped 0.35¢ to $1.53/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month increased 3.05¢ to $1.66/gal.

The natural gas contract for August gained 5.5¢ to $3.41/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 7.5¢ to $3.33/MMbtu.

In London, the August IPE contract for North Sea Brent crude also dropped below $60/bbl but closed at $61.10/bbl, up 67¢ for the day. July gas oil lost $4.75 to $483.75/tonne.

The average price for OPEC’s basket of 12 reference crudes dropped 53¢ to $60.58/bbl on July 9.

Contact Sam Fletcher at samf@ogjonline.com.

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