MARKET WATCH: Crude price jumps above $77/bbl

Crude made a “gold medal” rebound Feb. 16, jumping 4%—“the most in 4 months”—in the New York market as the US dollar plummeted against the euro, said analysts in the Houston office of Raymond James & Associates Inc.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Feb. 17 -- Crude made a “gold medal” rebound Feb. 16, jumping 4%—“the most in 4 months”—in the New York market as the US dollar plummeted against the euro, said analysts in the Houston office of Raymond James & Associates Inc.

“Optimism that the European Union will be able to bolster Greece, along with a better-than-expected rise in the Empire State Manufacturing Index, sent the euro (rebounding from its lowest level in 9 months), the broader market (Dow Jones Industrial Average up 2%), and energy stocks (Oil Service Index up 2%) higher,” Raymond James analysts said. “Natural gas couldn't get in on the action, however, as supply glut worries sent [futures] prices down 2% despite yet another winter storm that dumped snow across the Midwest and a forecast for colder temperatures across the country.”

In New Orleans, analysts at Pritchard Capital Partners LLC said crude gained “despite no oil-related news” as the US Dollar Index fell 0.9%. “Commodities also gained on euro strength, as traders’ optimism that Europe will assist in bolstering Greece helped increase appetites for risk. Crude settled above the 50-day moving average [of] $76.91 and could be poised to retest $80,” they said. Due to federal offices being closed for the Presidents Day holiday Feb. 15, the Energy Information Administration’s weekly petroleum report is delayed until Feb. 18.

Pritchard Capital Partners said, “Mitsui & Co. agreed to a $1.4 billion deal investing in the Marcellus shale with a 32.5% stake in Anadarko Petroleum Corp. Despite this positive news for the US natural gas industry and below-normal temperatures forecasted across the Midwest and Northeast through the remainder of the month, natural gas pared Feb. 12 gains on continued fundamental worries.”

Olivier Jakob at Petromatrix, Zug, Switzerland, reported limited activity in the London market, “with many traders away from their desks” for the Energy Institute’s International Petroleum Week Feb. 15-17 in that city. “The absence of traders leaves a little more room for the computers and with the dollar index taking a serious hit yesterday, West Texas Intermediate had not many options but to trade its incestuous inverse relationship to the dollar,” said Jakob. “The dollar index is now in front of a test of support at [$]79.50 and will remain a key directional input as WTI will test the resistance of the mini-rally of early February (intraday high of $78.04/bbl).”

He noted, “The whole commodity spectrum received a lift from the dollar index and rising equities yesterday, and in that regard it is interesting that the only non-dollar commodity (natural gas) was down during the day.”

Among other market factors are “the ‘what-if’ scenarios on Iran as the war of words continues between Iran and the West,” Jakob said. “Reading the Chinese stance is always difficult, but with the US President meeting the Dalai Lama tomorrow, we would not expect any rapid development from China on the subject of ‘Iranium.’ Military-wise, a military attack on Iran is not eminent as the US military is occupied enough with Afghanistan, and it has only one aircraft carrier in the region (providing air support to operations in Afghanistan).”

Energy prices
The March contract for benchmark US light, sweet crudes climbed $2.88 to $77.01/bbl Feb. 16 on the New York Mercantile Exchange. The April contract advanced $2.92 to $77.42/bbl. On the US spot market, WTI at Cushing, Okla., was up $2.88 to $77.01/bbl. Heating oil for March delivery gained 7.74¢ to $2/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 5.87¢ to $1.99/gal.

The March natural gas contract dropped 15.8¢ to $5.31/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 11.5¢ to $5.66/MMbtu.

In London, the April IPE contract for North Sea Brent crude gained $3.17 to $75.68/bbl. Gas oil for March gas oil jumped $27.25 to $611.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes advanced $1.34 to $73.06/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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