oil recovers lost ground as natural gas gains

Oil recovers lost ground as natural gas gains
Oil falls, but off lows under $55; natural gas gains on cold weather forecasts.

By Myra P. Saefong, MarketWatch
Last Update: 1:38 PM ET Jan 9, 2007


SAN FRANCISCO (MarketWatch) -- Crude-oil futures recovered some lost ground Tuesday as U.S. weather forecasts predicted more winter-like weather in the coming days, lifting prices for natural-gas futures by as much as 3%.
Artic air will move into the Northwest late Tuesday and bring snow to Seattle and Portland in the "the first shot of true winter weather that will spread across the nation in the upcoming week," AccuWeather reported.
Natural gas for February delivery climbed 18.7 cents, or 2.9%, to $6.565 per million British thermal units on the New York Mercantile Exchange, recovering from a low of $6.28 seen earlier in the session. The contract touched a more than two-week high of $6.59.
But oil prices have been pressured by the current above-normal temperatures in the northeastern U.S. and expectations that this week's supply data will show the first increase in crude inventories in seven weeks.
Crude for February delivery last traded down 7 cents at $56.02 a barrel in New York, bouncing off a low of $54.25 -- its lowest level since June 2005. Prices even fell to a low of $53.88 in overnight electronic trading.
All told, the contract has lost around 8% of its value since the beginning of the year.
On Monday, the contract closed lower although it held above $56 a barrel, finding limited support in rumblings from the Organization of the Petroleum Exporting Countries in support of promised production cuts as well as in a dispute between Belarus and Russia that caused the former to cut Russian oil supplies to Poland, Germany and the Ukraine.
"We did not think the 'bullish' factors listed above had the staying power to reverse the prevailing negative tone," said Edward Meir, analyst at Man Financial, in a note to clients.
OPEC could announce an emergency meeting to address the recent slide in oil prices, and that would have a knee-jerk effect, he said.
"However, the markets will then quickly focus on what OPEC intends to do, keeping in mind that the cartel has not exactly wowed participants with what it has done already," he said.
"No one believes OPEC, because it isn't following through on its previous cuts," Sean Brodrick, a contributing editor at MoneyandMarkets.com, said in e-mailed comments.
Meanwhile, the Russia-Belarus dispute "seems to be on a low boil," with most of Europe already well-supplied with product, said Meir.
"Belarus is not exactly the Ukraine in terms of the volume of crude that comes across its territory going westward," he said. "Moreover, a Belarus delegation is apparently in Moscow and the feeling is that the two sides will come to terms rather quickly; after all, these are two countries that not too long ago were seriously considering a political and economic union."
Even so, "typically news of a million barrel a day interruption would move the price up at least $4," said James Williams, an economist at WTRG Economics.
But news of the Russian cut was greeted with lower prices because the supply-interruption price premium is unwinding," he explained.
Other analysts also found offsetting factors to the reasons for oil's decline. See full story.
Too much supply?
Overall, oil's vulnerable to the factors that have weighed in the past week -- the impact of warm weather on heating demand and the comfortable state of supplies.
The latest forecasts are looking for cooler weather, with snow from the Great Lakes to the southern Appalachian Mountains Tuesday, according to AccuWeather. By later this week, the coldest weather will be centered over the Rockies and the northern Plains, brining another round of snow to Denver on Friday, it said.
Still, the recent warmer-than-usual weather in much of the U.S. will likely take its tool on the latest reports from the Energy Department and American Petroleum Institute due out on Wednesday, which cover the week ended Jan. 5.
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By Myra P. Saefong, MarketWatch
Last Update: 1:38 PM ET Jan 9, 2007


SAN FRANCISCO (MarketWatch) -- Crude-oil futures recovered some lost ground Tuesday as U.S. weather forecasts predicted more winter-like weather in the coming days, lifting prices for natural-gas futures by as much as 3%.
Artic air will move into the Northwest late Tuesday and bring snow to Seattle and Portland in the "the first shot of true winter weather that will spread across the nation in the upcoming week," AccuWeather reported.
Natural gas for February delivery climbed 18.7 cents, or 2.9%, to $6.565 per million British thermal units on the New York Mercantile Exchange, recovering from a low of $6.28 seen earlier in the session. The contract touched a more than two-week high of $6.59.
But oil prices have been pressured by the current above-normal temperatures in the northeastern U.S. and expectations that this week's supply data will show the first increase in crude inventories in seven weeks.
Crude for February delivery last traded down 7 cents at $56.02 a barrel in New York, bouncing off a low of $54.25 -- its lowest level since June 2005. Prices even fell to a low of $53.88 in overnight electronic trading.
All told, the contract has lost around 8% of its value since the beginning of the year.
On Monday, the contract closed lower although it held above $56 a barrel, finding limited support in rumblings from the Organization of the Petroleum Exporting Countries in support of promised production cuts as well as in a dispute between Belarus and Russia that caused the former to cut Russian oil supplies to Poland, Germany and the Ukraine.
"We did not think the 'bullish' factors listed above had the staying power to reverse the prevailing negative tone," said Edward Meir, analyst at Man Financial, in a note to clients.
OPEC could announce an emergency meeting to address the recent slide in oil prices, and that would have a knee-jerk effect, he said.
"However, the markets will then quickly focus on what OPEC intends to do, keeping in mind that the cartel has not exactly wowed participants with what it has done already," he said.
"No one believes OPEC, because it isn't following through on its previous cuts," Sean Brodrick, a contributing editor at MoneyandMarkets.com, said in e-mailed comments.
Meanwhile, the Russia-Belarus dispute "seems to be on a low boil," with most of Europe already well-supplied with product, said Meir.
"Belarus is not exactly the Ukraine in terms of the volume of crude that comes across its territory going westward," he said. "Moreover, a Belarus delegation is apparently in Moscow and the feeling is that the two sides will come to terms rather quickly; after all, these are two countries that not too long ago were seriously considering a political and economic union."
Even so, "typically news of a million barrel a day interruption would move the price up at least $4," said James Williams, an economist at WTRG Economics.
But news of the Russian cut was greeted with lower prices because the supply-interruption price premium is unwinding," he explained.
Other analysts also found offsetting factors to the reasons for oil's decline. See full story.
Too much supply?
Overall, oil's vulnerable to the factors that have weighed in the past week -- the impact of warm weather on heating demand and the comfortable state of supplies.
The latest forecasts are looking for cooler weather, with snow from the Great Lakes to the southern Appalachian Mountains Tuesday, according to AccuWeather. By later this week, the coldest weather will be centered over the Rockies and the northern Plains, brining another round of snow to Denver on Friday, it said.
Still, the recent warmer-than-usual weather in much of the U.S. will likely take its tool on the latest reports from the Energy Department and American Petroleum Institute due out on Wednesday, which cover the week ended Jan. 5.
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By Myra P. Saefong, MarketWatch
Last Update: 1:38 PM ET Jan 9, 2007


SAN FRANCISCO (MarketWatch) -- Crude-oil futures recovered some lost ground Tuesday as U.S. weather forecasts predicted more winter-like weather in the coming days, lifting prices for natural-gas futures by as much as 3%.
Artic air will move into the Northwest late Tuesday and bring snow to Seattle and Portland in the "the first shot of true winter weather that will spread across the nation in the upcoming week," AccuWeather reported.
Natural gas for February delivery climbed 18.7 cents, or 2.9%, to $6.565 per million British thermal units on the New York Mercantile Exchange, recovering from a low of $6.28 seen earlier in the session. The contract touched a more than two-week high of $6.59.
But oil prices have been pressured by the current above-normal temperatures in the northeastern U.S. and expectations that this week's supply data will show the first increase in crude inventories in seven weeks.
Crude for February delivery last traded down 7 cents at $56.02 a barrel in New York, bouncing off a low of $54.25 -- its lowest level since June 2005. Prices even fell to a low of $53.88 in overnight electronic trading.
All told, the contract has lost around 8% of its value since the beginning of the year.
On Monday, the contract closed lower although it held above $56 a barrel, finding limited support in rumblings from the Organization of the Petroleum Exporting Countries in support of promised production cuts as well as in a dispute between Belarus and Russia that caused the former to cut Russian oil supplies to Poland, Germany and the Ukraine.
"We did not think the 'bullish' factors listed above had the staying power to reverse the prevailing negative tone," said Edward Meir, analyst at Man Financial, in a note to clients.
OPEC could announce an emergency meeting to address the recent slide in oil prices, and that would have a knee-jerk effect, he said.
"However, the markets will then quickly focus on what OPEC intends to do, keeping in mind that the cartel has not exactly wowed participants with what it has done already," he said.
"No one believes OPEC, because it isn't following through on its previous cuts," Sean Brodrick, a contributing editor at MoneyandMarkets.com, said in e-mailed comments.
Meanwhile, the Russia-Belarus dispute "seems to be on a low boil," with most of Europe already well-supplied with product, said Meir.
"Belarus is not exactly the Ukraine in terms of the volume of crude that comes across its territory going westward," he said. "Moreover, a Belarus delegation is apparently in Moscow and the feeling is that the two sides will come to terms rather quickly; after all, these are two countries that not too long ago were seriously considering a political and economic union."
Even so, "typically news of a million barrel a day interruption would move the price up at least $4," said James Williams, an economist at WTRG Economics.
But news of the Russian cut was greeted with lower prices because the supply-interruption price premium is unwinding," he explained.
Other analysts also found offsetting factors to the reasons for oil's decline. See full story.
Too much supply?
Overall, oil's vulnerable to the factors that have weighed in the past week -- the impact of warm weather on heating demand and the comfortable state of supplies.
The latest forecasts are looking for cooler weather, with snow from the Great Lakes to the southern Appalachian Mountains Tuesday, according to AccuWeather. By later this week, the coldest weather will be centered over the Rockies and the northern Plains, brining another round of snow to Denver on Friday, it said.
Still, the recent warmer-than-usual weather in much of the U.S. will likely take its tool on the latest reports from the Energy Department and American Petroleum Institute due out on Wednesday, which cover the week ended Jan. 5.
Related Blog Posts & Articles


E-mail | Print | Digg it | Del.icio.us | RSSContinued on page 2
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http://www.marketwatch.com/news/story/oil-recovers-lost-ground-natural/story.aspx?guid=%7B7F6B6D2E%2DFD1F%2D4696%2DAD82%2D93680CB74A5B%7D&dist=TNMostReadBy Myra P. Saefong, MarketWatch