U.S. Crude Futures Rebound on Cold
NYMEX-traded crude recouped a portion of the losses from the previous session on Tuesday as traders awaited a weekly report on petroleum inventories. Most traders expect the storage update to show that supplies are beginning to drain in earnest from the key Cushing, Okla. hub since the southern leg of TransCanada Corp.’s Keystone pipeline went into service last month. Oil stockpiles at Cushing were predicted to have dropped by more than 1 million barrels for the first time in five months. Upside momentum also came from a stronger U.S. equities market and frigid weather in the U.S., which has significantly boosted oil demand as refiners pump out distillates, which include heating fuels. West Texas Intermediate (WTI) for March delivery ended 76¢ higher at US$97.19 per barrel (/bbl) – rebounding after its largest daily percentage loss in nearly a month on Monday. The March WTI contract traded at a session high of $97.71/bbl. In European trading, Brent losses were steepened by worries over emerging markets, but the losses were capped by tighter supply in the North Sea after an output glitch at the 200,000 barrel-per-day Buzzard oilfield – the largest field that contributes to the Forties crude blend. According to Bloomberg reports, the field has restarted and will return to normal levels in the next few days. Prompt-month March Brent settled down 26¢ at $105.78/bbl – the lowest closing price since November 8. The rise in the front-month WTI oil contract narrowed its discount to Brent by $1.02 to $8.59/bbl, from $9.61/bbl a day earlier.
Natural Gas Futures Soar Nearly 10%
U.S. natural gas futures surged nearly 10% on Tuesday, settling at their highest price in almost a week, with traders betting on a sizeable weekly drawdown in U.S. supplies as severe cold lingers in the Northeast. Rapidly declining inventories and extreme cold weather have produced volatile daily price swings. Front-month futures gained or lost at least 5% every day since January 23, and jumped more than 10% higher on two of those days. On January 30, prompt-month natural gas erased more than 8%. After establishing an intra-day high of US$5.397 per million British thermal units (/mmBtu), NYMEX-traded gas for March delivery closed at $5.375/mmBtu, up 47¢, or 9.6%. In the cash market, natural gas for next-day delivery at Henry Hub – the benchmark supply point in Louisiana – settled up 71¢ at $5.73/mmBtu – the highest level since January 2010. Late trades were heard at a 36¢ premium to the NYMEX, strengthening from Monday’s 12¢ premium. Over the next five days, most weather outlooks call for another round of Arctic-like cold in the U.S. Northwest, Rockies and Plains. In the six- to 10-day period, severe cold is expected in the East and Midwest. Meanwhile, early consensus estimates predict a drawdown in natural gas inventories of between 240 billion cubic feet (Bcf) and 281 Bcf. In the week ended January 24, withdrawal from U.S. natural gas storage totaled 230 Bcf, according to the U.S. Energy Information Administration.
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