MARKET WATCH: Energy prices rise again

Energy prices continued to waffle with crude temporarily topping $80/bbl in intraday trading Mar. 2 but still unable to sustain that price level in the New York market.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 3 -- Energy prices continued to waffle with crude temporarily topping $80/bbl in intraday trading Mar. 2 but still unable to sustain that price level in the New York market.

“A falling dollar added support to prices as investors continued to jump into oil throughout the day,” said analysts in the Houston office of Raymond James & Associates Inc. The price of natural gas increased slightly “as colder weather now appears headed toward the Midwest, an about-face from Monday where a warmer forecast sent prices down,” they said.

The Energy Information Administration said Mar. 3 commercial US crude inventories jumped by 4.1 million bbl to 341.6 million bbl in the week ended Feb. 26. That far exceeded Wall Street’s consensus for a 1.3 million bbl increase. Gasoline inventories for the same week were up 700,000 bbl to 231.9 million bbl, above the expected increase of 300,000 bbl. Distillate fuel inventories fell 900,000 bbl to 151.8 million bbl; the outlook was for a 1.1 million bbl loss.

Imports of crude into the US increased by 152,000 b/d to 9.2 million b/d in the same week. In the 4 weeks through Feb. 26, US imports of crude averaged 8.8 million b/d, down 471,000 b/d from the comparable period in 2009.

The input of crude into US refineries dipped by 33,000 b/d to 14.1 million b/d last week with units operating at 81.9% of capacity. Gasoline production decreased to 8.8 million b/d. Distillate fuel production increased to 3.8 million b/d.

The American Petroleum Institute earlier reported US crude inventories increased 2.7 million bbl to 337.1 million bbl in that same week, with gasoline up 909,000 bbl to 232.9 million bbl. Distillate fuel dropped 4.1 million bbl to 154.6 million bbl. It reported refineries operating at 81.6% of capacity.

In other news, 320,000 b/d Isla refinery on the Caribbean island of Curacao has been shutdown since a power-failure Mar. 1. Workers went on strike to protest power supply snags after an effort to restart the refinery failed. Venezuela’s state-owned Petroleos de Venezuela SA (PDVSA) leases and operates that refinery. Union officials, PDVSA and utility company staffs, and government officials were reported in negotiations to resolve that problem.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “It is difficult to price that event as power failures are not necessarily that much of a structural problem. The real electricity problem for Venezuela remains inland where it still is facing a grave shortage of power linked to the low water levels in the main hydropower plant. With the power shortages it is unlikely that Venezuela will print a record-high crude production number anytime soon, and it is more likely that we see a drift lower of production from that country.”

Overall, however, production by members of the Organization of Petroleum Exporting Countries “are trending gently higher as flows continue to improve from Iraq and Nigeria, and according to various estimates, OPEC crude oil production should be in February 1.3 million b/d higher than last year; this when the International Energy Agency’s ‘Call-On-OPEC’ is only 300,000 b/d higher in the second quarter of 2010 vs. the second quarter of 2009,” Jakob said.

Energy prices
The April contract for benchmark US light, sweet crudes traded as high as $80.95/bbl Mar. 3 on the New York Mercantile Exchange before closing at $79.68/bbl, up 98¢ for the day. The May contract also increased 98¢, to $80.06/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., continued to track the front-month futures contract, up 98¢ to $79.68/bbl. Heating oil for April delivery gained 3.26¢ to $2.06/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month advanced 4.1¢ to $2.20/gal.

The April natural gas contract increased 2.9¢ to $4.71/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 8.5¢ to $4.77/MMbtu.

In London, the April IPE contract for North Sea Brent crude was up $1.29 to $78.18/bbl. Gas oil for March gained $4.25 to $638/tonne.

The average price for OPEC’s basket of 12 reference crudes fell 24¢ to $75.51/bbl.

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