MARKET WATCH: Cold weather, warming economy raise prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, Feb. 2 -- Natural gas and heating oil prices jumped Feb. 1 in the New York market as frigid weather in the US Northeast drove up demand for those fuels, pulling other energy commodity prices up with them.

The National Weather Service updated its previous outlook for milder weather and now predicts lower-than-normal temperatures across most of the continental US for Feb. 6-14. After falling nearly 11% last week, gas prices jumped 6% as the updated forecast forced traders to scramble to cover positions.

“With the US weather forecast still relatively cold for the next 2 weeks, natural gas was very well supported and heating oil was leading the petroleum complex while the gasoline crack was under heavy pressure and making for a lower refinery 3-2-1 margin,” said Olivier Jakob at Petromatrix, Zug, Switzerland. “Large speculators are still holding large net length in gasoline, and whatever positions are still in the front will need to be rolled in the seasonally wide contango between the March and April contracts.”

Crude prices rebounded from a 5-week low, buoyed by an increase in the equity markets following an unexpected strong report on the US manufacturing industry on Feb. 1 and an earlier increase in the gross domestic product for the fourth quarter. On Feb. 2, the National Association of Realtors reported a 1% rise in its index of sale contracts in December, the ninth increase in 10 months.

Also influencing the market was a report of renewed attacks on oil field structures in Nigeria, causing Royal Dutch Shell PLC to shut in some flow stations after sabotage caused a pipeline leak. The rebel Movement for the Emancipation of the Niger Delta said Jan. 30 it was ending an indefinite cease-fire in Nigeria after 3 months. However, another group apparently was responsible for the pipeline sabotage (OGJ Online, Feb. 1, 2010).

Energy prices
The March contract for benchmark US sweet, light crudes escalated by $1.54 to $74.43/bbl on the New York Mercantile Exchange. The April contract climbed $1.56 to $74.91/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.54 to $74.43/bbl. The new March contract for heating oil bumped up 4.19¢ to $1.95/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 1.87¢ to $1.93/gal.

The March natural gas contract jumped 30.3¢ to $5.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 6¢ to $5.33/MMbtu.

In London, the March IPE contract for North Sea Brent crude advanced $1.65 to $73.11/bbl. Gas oil for February was unchanged at $586.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes inched up 1¢ to $71.02/bbl.

Contact Sam Fletcher at samf@ogjonline.com.



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