MARKET WATCH: Crude declines as dollar strengthens

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 22 -- Energy prices continued falling Mar. 19 with crude registering its biggest decline in more than 3 weeks on the New York market while the US dollar strengthened amid speculation the European Union might not bail out Greece’s economy.

Analysts in the Houston office of Raymond James & Associates Inc. reported crude prices were below $80/bbl in early trading Mar. 22.

In New Orleans, analysts at Pritchard Capital Partners LLC noted the April crude contract settled at $82.93 on Mar. 17—the highest level for a front-month contract since Jan. 6—with signs of strengthening demand in emerging markets. “However, oil continues to follow the dollar play as Greek financial concerns have made a comeback,” they said.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The printing machine of the Federal Reserve might be putting some pressure on the dollar, but at least the dollar is the currency of one country, whereas the Greek disaster is highlighting the virtual concept of Europe and the lack of solidarity within the Union. This will probably make the [UN’s International Monetary Fund] the only possible lender to avoid a Greek bankruptcy.”

After selling off more than 5% on a bearish storage number Mar. 18 in New York, the April natural gas contract rebounded 2.1% on Mar. 19. Pritchard Capital Partners attributed the increase to anticipation of “some buying support from utilities” while gas prices hover near the lowest levels in more than 5 months. However, analysts also noted this winter is now 96% complete and was only 2.5% colder than normal. They said, “Bearish sentiments prevail on concerns that due to increased drilling activity, supplies may actually rise in 2010, exacerbating the situation in an already well-supplied market.”

Raymond James analysts said, “A late-season snowstorm hit the US plains over the weekend, but prices appear to have been largely unaffected by winter's encore performance.”

Energy prices
The April contract for benchmark US light, sweet crudes opened at the day’s high of $82.17/bbl but closed at $80.68/bbl Mar. 19 on the New York Mercantile Exchange, down $1.52 for the day. The May contract dropped $1.57 to $80.97/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.52 to $80.68/bbl. Heating oil for April delivery declined 4.24¢ to $2.08/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased 4.53¢ to $2.26/gal.

The April natural gas contract gained 8.4¢ to $4.17/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 18.5¢ to $4.02/MMbtu.

In London, the May IPE contract for North Sea Brent crude was down $1.60 to $79.88/bbl. Gas oil for April dropped $15 to $658.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes lost 72¢ to $77.18/bbl. So far this year, OPEC’s basket price has averaged $75.20/bbl.

Contact Sam Fletcher at samf@ogjonline.com