MARKET WATCH: Oil prices jump $2/bbl on a brief rally

Crude oil futures prices gained more than $2/bbl on the New York market on Apr. 1 to settle slightly above $50/bbl while opinions varied among analysts about the timing and strength of an oil-price recovery.

Brent prices on the London market also rose nearly $2/bbl to settle above $57/bbl for the May contract.

But the rally appeared to be only a 1-day event because crude prices worldwide pulled back in early trading Apr. 2 on news that international talks to curtail Iran’s nuclear program had continued past a preliminary deadline.

ING analysts said they were relatively unconcerned about high US crude oil inventories because oil demand also is showing strength. ING attributed much of the inventory build to seasonal refinery maintenance.

“Given supply cuts and sustained demand strength, we reiterate our price forecast of $65/bbl [Brent] for the second quarter, but remain wary of the dollar freight train,” ING told the Wall Street Journal. A strengthening dollar pushes down dollar-based commodities such as crude oil.

Meanwhile, Barclays analysts said the second quarter could be the weakest quarter for the year for oil prices. They expect Brent will fall to an average $47/bbl in the second quarter and slowly recover to $55/bbl by Dec. 31.

Analysts noted many uncertainties exist that could trigger crude-oil price swings, including a potential Iran deal and renewed turmoil in Yemen.

Societe Generale said an agreement over Iran’s nuclear program would jerk oil prices upward briefly, but the bank noted that existing sanctions on Iran oil exports only could be lifted after a final agreement was signed in late June.

Meanwhile, US natural gas futures prices fell slightly upon weather forecasts signaling an end to the heating season.

The US Energy Information Administration reported a withdrawal in underground natural gas storage across the Lower 48 in its weekly Natural Gas Storage report.

Working gas in storage was 1.46 tcf as of Mar. 27, according to EIA estimates. This represented a net decline of 18 bcf from the previous week. Stocks were 628 bcf higher than last year at this time and 190 bcf below the 5-year average of 1.651 tcf.

Energy prices

The New York Mercantile Exchange May crude oil contract gained $2.49 on Apr. 1 to $50.09/bbl. The June contract added $2.41 to $51.75/bbl.

The natural gas contract for May dropped 3.5¢ to a rounded $2.61/MMbtu. The Henry Hub, La., gas price was $2.60/MMbtu, down 2¢.

Heating oil for April delivery was up 3.9¢ to $1.75/gal. Reformulated gasoline stock for oxygenate blending for April climbed 6¢ to a rounded $1.83/gal.

The May ICE contract for Brent crude gained $1.99 to $57.10/bbl, while the June contract was up $1.98 to $58.19/bbl. The ICE gas oil contract for April rose $7.25 to $533.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Apr. 1 was $52.48/bbl, up $1.42.

Contact Paula Dittrick at paulad@ogjonline.com.

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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