MARKET WATCH: Oil prices follow broader market up
Oil prices rebounded Nov. 29, pulled up by the broader market, with crude increasing 1.9% to end a 3-day decline in the New York market. Report of an increase in US natural gas inventory drove the new front-month gas contract down 4%.
The Energy Information Administration reported the injection of 4 bcf of natural gas in US underground storage in the week ended Nov. 23, while the Wall Street consensus was for the withdrawal of 6 bcf. That increased working gas in storage to 3.877 tcf, up 26 bcf from the comparable period in 2011 and 190 bcf above the 5-year average (OGJ Online, Nov. 29, 2012).
“Oil markets were up, continuing the see-saw trend of the past week,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Amid fiscal cliff concerns and continued worries about the Euro-zone debt crisis, an upward revision of US gross domestic product growth for the third quarter gladdened markets (OGJ Online, Nov. 29, 2012).”
However, he said, “While the market took encouragement from the revisions, it is worth noting that most of the upward revision was driven by inventory builds. In addition, personal consumption expenditure growth, the engine of the US economy, was revised downwards, from an initial estimate of 2% to 1.4% quarter-over-quarter. Business investment also contracted by 2.2% rather than the 1.3% that was initially estimated. The US economy remains fragile, with the uncertainty surrounding the fiscal cliff already appearing to have weighed on consumer and business confidence in the third quarter. Consequently, we don’t expect much of an improvement, if any, to be evident in fourth quarter macroeconomic data.”
Despite uncertainty surrounding budget negotiations, “opportunists” are “making some money off the ebbs and flows of the [President Barack] Obama-[House Speaker John] Boehner mystery dance,” said analysts in the Houston office of Raymond James & Associates Inc. “Yesterday, the Standard & Poor’s 500 Index jumped another 0.4%, extending the rally to 2 days. However, with President Obama’s opening bid missing the mark, it looks like the optimists may be disappointed today.”
In a private meeting with congressional leaders Nov. 29, Sec. of the Treasury Timothy Geithner presented what Democrat officials described as the opening bid in negotiations, calling for increasing taxes by $1.6 trillion over 10 years, a spending program to aid the unemployed and struggling homeowners, and legislation next year for 10-year savings from Medicare and other benefit programs totaling $400 billion.
However, Boehner, R-Ohio, said there was no substantive progress in settling the stalemate. Meanwhile, Obama is on the road in a campaign-style effort to drum up public support for his proposed solution to the pending fiscal cliff.
Energy prices
The January contract for benchmark US light, sweet crudes reclaimed $1.58 to $88.07/bbl Nov. 29 on the New York Mercantile Exchange. The February contract escalated $1.53 to $88.66/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.58 to $88.07/bbl.
Heating oil for December delivery rose 3.26¢ to $3.04/gal on NYMEX. Reformulated stock for oxygenate blending for the same month climbed 5.31¢ to $2.79/gal.
The new front-month January natural gas contract fell 15.3¢ to $3.65/MMbtu on NYMEX, however. On the US spot market, gas at Henry Hub, La., dropped 4¢ to $3.64/MMbtu.
In London, the January IPE contract for North Sea Brent was up $1.25 to $110.76/bbl. Gas oil for December jumped $16.75 to $948.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 47¢ to $107.46/bbl.
Contact Sam Fletcher at [email protected].
Sam Fletcher | Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.
