Sam Fletcher
OGJ Senior Writer
HOUSTON, Mar. 2 -- Energy prices fell Mar. 1, giving up much of the gains from the previous session as the euro weakened against the dollar with renewed concerns over the financial crisis in Greece.
Crude traded as high as $80.62/bbl in the New York market but for the third consecutive session could not maintain support above $80/bbl.
“The Institute for Supply Management’s manufacturing index fell from 58.4 to 56.5 in February, further pushing down crude on demand worries. With resistance at $80 and the market’s inability to post consecutive positive macroeconomic indicators, crude is unlikely to elevate above $80/bbl,” said analysts at Pritchard Capital Partners LLC in New Orleans. “Natural gas fell to a 3-month low on milder weather forecasts. Despite a 4% colder than normal winter (Nov. 1 through Feb. 25), bearish sentiments prevail as winter is nearly 84% over and the market is focusing on retraction of weather-driven support at the end of winter.” Robust gas production also provided support for a bearish gas market, they said.
The 100,000-b/d Aconcagua refinery is expected to be back on stream in 10 days after the 8.8-magnitude earthquake that rocked Chile over the weekend. But a second refinery, the 114,000-b/d Bio Bio unit, “is much closer to the main area of destruction and will probably have to be shut for a longer period,” said Olivier Jakob at Petromatrix, Zug, Switzerland. Meanwhile he said, “The ICE gas oil time-spreads have continued to narrow; they are offering less an incentive for barrels to be put afloat on the water, and the additional requirements [for diesel] from Chile will be a welcome outlet to replace waning demand for floating storage.”
Jakob said, “If the distillates complex was relatively well supported by the potential increased demand from Chile, gasoline was under pressure and made for a small reduction in the 3-2-1 West Texas Intermediate refinery margins. Apart from Chile, the other significant market input yesterday was the [British] pound that deserved the making of the verb ‘pounded.’” He said, “One thing for sure, at current oil prices and current exchange rates, we will not be expecting a strong rebound in gasoline demand for the UK this year.”
The contango on crude futures “remains relatively shallow, but the cash differentials are moving further south to price crude oil either back into storage or into greater processing for products,” said Jakob. “We would therefore expect the current negative cycle on crude oil cash differentials to work its way through a renewed cycle of pressure on the crude oil futures time-spreads.
He said, “On the geopolitical front, the drive for new sanctions against Iran is increasing but is likely to have a narrow target unrelated to oil to win the support or abstinence from Russia and China.”
Energy prices
The April contract for benchmark US sweet, light crudes lost 96¢ to $78.70/bbl Mar. 1 on the New York Mercantile Exchange. The May contract dropped 93¢ to $79.08/bbl.
On the US spot market, WTI at Cushing, Okla., was down 96¢ to $78.70/bbl. The new front-month April heating oil contract declined 1.18¢ to $2.02/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month decreased by 3.23¢ to $2.16/gal.
The April natural gas contract dropped 13.4¢ to $4.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 5¢ to $4.85/MMbtu.
In London, the April IPE contract for North Sea Brent crude fell 70¢ to $76.89/bbl. Gas oil for March gained $5 to $633.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased by $1.16 to $75.76/bbl.