MARKET WATCH: Energy prices continue climbing in shifting markets
Sam Fletcher
OGJ Senior Writer
HOUSTON, Feb. 12 -- The front-month crude contract increased for the fourth consecutive session Feb. 11 in the New York market, topping $75/bbl as other countries that share the euro currency vowed to save Greece from default on sovereign debt so as to prevent undermining the European recovery.
However, Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The dollar index and its gyration around the Greek theme have been instrumental in the intraday price formation of West Texas Intermediate for most of this week. The heads of Europe have not been able to produce more than air to lift Greece at their meeting yesterday, and this is maintaining pressure overnight on the euro.”
Natural gas registered “the largest 1-day gain since the beginning of the month” on “a drop in jobless claims, indicating industrial demand, which accounts for 29% of US consumption, is likely improving, and cold temperatures across the US likely resulting in higher residential demand,” said analysts at Pritchard Capital Partners LLC in New Orleans.
“Crude prices, which were up over 5% for the week, rose 1% yesterday, after European leaders continued their pledge of support for debt-laden Greece,” said analysts in the Houston office of Raymond James & Associates Inc. However, they reported commodities, particularly crude, were trending down in early trading after China's Central Bank raised bank reserve requirements by 50 basis points Feb. 12, boosting the US dollar against other major currencies.
That marks the second time China has raised its bank reserve requirement this year, “surprising the market and leading to a jump in the dollar and a retreat for US and European equities, along with most commodities,” said Raymond James analysts. “The market's concern is that monetary tightening will limit growth in the Chinese economy, especially crimping commodity imports. That is, of course, the aim of the Chinese government, but let's put things in perspective: Chinese gross domestic product rose at a nearly 11% rate in the fourth quarter, and Beijing is aiming to cool things down a bit to a 10% rate for 2010. While ‘even’ 10% is still extremely impressive for an economy the size of China's and implies oil demand growth at or above what we're modeling…the markets are in a finicky mood of late, and Beijing's move will be negative for sentiment,” they said.
Meanwhile, electricity consumption in China jumped 40% from year-ago levels in January. According to the nation's energy agency, industrial users consumed 7 billion kw-hr, a 23.5% increase from a year ago. China's electricity demand is expected to rise 9% in 2010 compared with a 7% increase in 2009.
Jakob said, “The strength in crude oil continues to go against gasoline, and the sliding cracks should start to have a negative impact on refinery operations. Large speculators have significant length in gasoline but the mother-of-all-snowstorm on the East Coast is not something that could have been anticipated. The transportation fuel demand destruction that is associated with the record snowfall in the US East Coast should turn into greater-than-expected stock builds of gasoline and diesel, which given the limited storage capacity available pressures the cracks….”
US financial markets will be closed Feb. 5 for the Presidents Day holiday.
In other news, 2 days after being confirmed by the Nigeria Senate, President Goodluck Jonathan met with executives from Chevron Corp., ExxonMobil Corp., and Royal Dutch Shell PLC about increasing production from the Niger Delta where recent attacks by militants shut down pipelines. Raymond James analysts said, “Although the extent of Jonathan's power as interim chief is not clear, the acting president could wield significant influence should Nigeria move forward with petroleum legislation set to increase taxes and reduce profits for oil companies.” Jonathan is the first Nigerian president from the delta area.
US inventories
The Energy Information Administration said Feb. 12 commercial US crude inventories increased by 2.4 million bbl to 331.4 million bbl in the week ended Feb. 5, surpassing the Wall Street consensus of a 1.6 million bbl increase. Gasoline stocks gained 2.3 million bbl to 230.4 million bbl, compared with analysts’ expectations of a 600,000 bbl gain. Distillate fuel inventories dipped by 300,000 bbl to 156.2 million bbl in the same week, far less than the 1.6 million bbl decrease analysts expected.
EIA reported the withdrawal of 191 bcf of natural gas from US underground storage during that week. That reduced working gas in storage to 2.2 tcf, up by 172 bcf from year-ago levels and 114 bcf above the 5-year average.
“After last week's relatively colder weather, the blizzard that blanketed the Mid-Atlantic this week, and forecasts for colder weather in late February, we could see significant withdrawals from [gas] storage over the next couple of week,” said Raymond James analysts.
Energy prices
The March contract for benchmark US light, sweet crudes increased 76¢ to $75.28/bbl Feb. 11 on the New York Mercantile Exchange. The April contract gained 83¢ to $75.72/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 76¢ to $75.28/bbl. Heating oil for March delivery rose 1.61¢ to $1.96/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month inched up 0.67¢ to $1.94/gal.
The March natural gas contract continued to climb, up 10.4¢ to $5.40/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 3¢ to $5.51/MMbtu.
In London, the March IPE contract for North Sea Brent crude was up 51¢ to $73.05/bbl. Gas oil for February was unchanged at $576.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased $1.03 to $71.81/bbl.
Contact Sam Fletcher at [email protected].