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March 20th, 2012

CES Market Summary Released For March 19, 2012

by Tobias Grindal, Energy Analyst

Prices for NYMEX crude oil were largely unchanged last week. The market remains relatively stuck as the market participants wait to see what impact tightening economic sanctions by the U.S. and Europe over Iran’s nuclear program have on the country.

Mixed economic news from across the globe caused prices to fluctuate in the $105 to $110 per barrel range. China, the world’s second-largest user of crude, reported early in the week that it had a trade deficit in February. China typically has a trade surplus and February’s deficit was the largest it has had in the last 22 years. This put downward pressure on prices as many analysts took this to mean that the country’s economy might not grow as quickly as had been anticipated.  On Wednesday, Saudi Arabia stated they would intervene in the world marketplace in case tensions with Iran led to supply disruptions. That same day, President Barack Obama told reporters at a White House news conference that, “the window for solving this issue [with Iran] diplomatically is shrinking.”

The economic news from the U.S. was mostly positive. On Tuesday, The Commerce Department reported that retail sales rose 1.1 percent in February, and on Thursday, The Labor Department reported that U.S. applications for unemployment had fallen by 14,000 the previous week. However, the market was anything but bullish when it was reported on Thursday that President Barack Obama and U.K. Prime Minister David Cameron discussed a release from the U.S. Strategic Petroleum Reserve to ease the recent increases in gasoline prices.

Natural gas prices fell three out of five days last week, but ended up posting a weekly gain for the first time in a month. Forecasts for warmer-than-normal temperatures for most of the U.S. dragged down prices at the start of the week, but market participants were induced into buying as prices closed in on near 10-year lows toward the end of the week.

Natural gas storage continues to be bearish as gas in storage is now 52 percent above the 5-year average for this report week, and the first net injection, which typically occurs during the week ended March 30, may happen a week early this year.

The National Weather Service near-term forecast calls for continued warmer-than-normal temperatures in all of the US east of the Rockies. The market scores remain very close to 100 as prices for each term are near their two-year lows. Clients with electricity or natural gas contracts expiring in 2012, 2013 and 2014 should consult with a CES representative for customized guidance.

For the entire CES Market Summary, please see http://www.competitive-energy.com/market-summary/CESMarketSummary_031912.pdf.

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