MARKET WATCH: Oil, gas prices rise in NY market

The price of natural gas futures rebounded 1.3% on Mar. 23 in the New York market, and crude continued to climb for the second consecutive session, up 1%.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 24 -- The price of natural gas futures rebounded 1.3% on Mar. 23 in the New York market, and crude continued to climb for the second consecutive session, up 1%.

Gas prices advanced “as traders went bargain hunting, buying back contracts after prices have plummeted since the start of the year,” said analysts in the Houston office of Raymond James & Associates Inc.

However, they said signs were pointing to oil price declines Mar. 24. “The dollar strengthened (again) vs. the euro on concerns that Greece may turn to the International Monetary Fund for help, therefore undermining the European Union,” they said.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “So far in 2010, trading crude oil has been as easy as trading copper: just follow the sentiment on equities in the hope that the Dow [Jones Industrial Average] is a good indicator of economic recovery. That is putting a lot of trust in the equity indicator especially when volume on the New York Stock Exchange continues to be at abnormal low level.”

He said, “Going for the equity correlation, crude oil has dropped the dollar correlation, but this will start to translate into a fundamental adjustment on oil demand if the dollar continues to move higher since petroleum products for non-dollar economies are getting dearer by the day.”

US inventories
The Energy Information Administration said Mar. 24 commercial US crude inventories shot up 7.3 million bbl to 351.3 million bbl in the week ended Mar. 19, far outstripping the Wall Street consensus for a 1.7 million bbl increase and likely putting downward pressure on prices. Crude inventories are above average for the time of year.

Gasoline stocks fell 2.7 million bbl to 224.6 million bbl in the same period, exceeding expectations of a 1.5 million bbl decline. Those stocks remain above average for this period. Distillate fuel inventories dropped 2.4 million bbl to 145.7 million, compared with estimates of a 1 million bbl decrease. Distillates also remain above average for this time of year.

The American Petroleum Institute earlier reported US crude inventories jumped 7.5 million bbl to 351.5 million bbl in the same week, with gasoline down 87,000 bbl to 226 million bbl and distillates falling 2.5 million bbl to 148.6 million bbl. Refineries were down to 80.8% of operational capacity, API said.

EIA said US crude imports increased by 969,000 b/d to 9.4 million b/d last week. US crude imports averaged 8.9 million b/d over the 4 weeks ended Mar. 19, down 326,000 b/d from the comparable period last year.

The input of crude into US refineries increased by 102,000 b/d to 14 million b/d last week with units operating at 81.1% of capacity, EIA said. Gasoline production increased to 9 million b/d. Distillate fuel production decreased to 3.7 million b/d.

The higher-than-expected stock builds are “another wake-up call for anyone wanting to trade oil purely on a correlation to the Standard & Poor’s 500 index,” Jakob said. “The fundamentals are still not showing a picture where demand needs to be destroyed by higher prices to balance the supply and demand. Stocks remain high, and the petroleum system running at sub-capacity is not showing any signs of distress.”

Energy prices
The new front-month May contract for benchmark US light, sweet crudes gained 31¢ to $81.91/bbl Mar. 23 on the New York Mercantile Exchange. The June contract increased 28¢ to $82.25/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 31¢ to $81.56/bbl as it tried to get in step with the new front-month futures contract. Heating oil for April delivery increased 1.81¢ to $2.10/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month inched up 0.66¢ but the closing price again remained virtually unchanged at $2.26/gal.

The April natural gas contract regained 5.1¢ to $4.13/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 4.5¢ to $4.10/MMbtu.

In London, the May IPE contract for North Sea Brent crude gained 16¢ to $80.70/bbl. Gas oil for April advanced $8 to $670.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 79¢ to $77.54/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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