MARKET WATCH: Energy prices fall for third session
Sam Fletcher
OGJ Senior Writer
HOUSTON, Aug. 9 -- Energy prices fell for the third consecutive session Aug. 6 on the New York market after the US government reported a larger-than-expected drop in July jobs, which analysts saw as yet another indicator of a slowing economic recovery.
“Oil and natural gas continued the trend, falling 1.7% and 2.9%, respectively,” said analysts in the Houston office of Raymond James & Associates Inc. “Furthermore, despite weak natural gas prices, the natural gas rig count continues to surprise the upside with yet another increase [last] week, which left us with 44% more gas rigs than this time last year.”
Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, said, “The broader commodities markets fell after the Labor Department reported that private payrolls rose by only 71,000 in July while economists were expecting a 90,000 gain. The Labor Department also revised the June private payroll gain down to 31,000 from 83,000.”
Sharma added, “Non-commercials upped their net long positions in crude futures to 55,678 contracts from 44,313 in the week ending July 27. Although signs of only moderate job growth will put downward pressure on prices, the increasing flow of the speculative capital back into the market has been providing support to crude.”
The Standard & Poor’s 500 index made a late rebound Aug. 6 “that managed to limit the losses induced by a worse-than-expected job report,” said Olivier Jakob at Petromatrix, Zug, Switzerland. On the basis of the closing price for the front-month crude contract, West Texas Intermediate “is now overbought to the correlation model by ‘only’ $1.20/bbl; the implied correlation value for WTI being at $79.50/bbl,” Jakob said
Meanwhile, fracing “is likely to continue making headlines in political circles, even though the Environmental Protection Agency has previously ruled out any risk of water damage from fracing,” Raymond James analysts warned. “For now, we do not foresee any new fracing-related federal legislation being enacted, though some state-level action is to be expected. Once the new EPA study concludes, a chemicals disclosure requirement (along the lines of the bill that is currently pending in Congress) could pass, but this would have a minimal effect on the industry. To summarize, fracing has minimal environmental impact and poses essentially no risk to human health.”
Energy prices
The September contract for benchmark US light, sweet crudes fell $1.31 to $80.70/bbl Aug. 6 on the New York Mercantile Exchange. The October contract dropped $1.27 to $81.18/bbl. On the US spot market, WTI at Cushing, Okla., was down $1.31 to $80.70/bbl. Heating oil for September delivery declined 3.96¢ to $2.15/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month lost 5.17¢ to $2.11/gal.
The September natural gas contract dropped 13.1¢ to $4.47/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 24.5¢ to $4.60/MMbtu.
In London, the September IPE contract for North Sea Brent crude lost $1.45 to $80.16/bbl. Gas oil for August fell $9.25 to $678.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was down 54¢ to $78.15/bbl.
Contact Sam Fletcher at [email protected]