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Oil nears US$75 per barrel on economic optimism
Source: Agencies |
August 25, 2009, Tuesday
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OIL prices approached US$75 a barrel yesterday for the first time in 10 months amid growing optimism that the world's economies are on the mend.
Benchmark crude for October delivery rose 48 cents to settle at US$74.37 a barrel on the New York Mercantile Exchange. Oil last topped US$75 in October and yesterday, prices came within 19 cents of that mark.
Natural gas rebounded strongly from new seven-year lows yesterday, yet still traded below US$3 per 1,000 cubic feet because of a huge glut and very little demand from major industrial customers.
Expectations that demand for energy will grow, at least for oil and gasoline, were spurred Friday by Federal Reserve Chairman Ben Bernanke, who said the U.S. economy is reviving. Bernanke's remarks and signs of improvement in the U.S. housing market sent stock markets higher, and that carried over into the new week.
Even before Bernanke spoke, however, prices already had begun to rise on a large and unexpected drawdown in U.S. oil supplies. One factor that might be keeping crude below US$75 is the possibility that last week's storage report was an aberration, given that demand for now remains weak.
Equity and energy markets have been rising and falling in tandem for weeks and at the start of this week, it was more of the same.
Asian and European markets climbed yesterday, and the Dow Jones industrial average rose moderately in afternoon trading.
"No doubt about it, we're riding the wave of a strong stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "These bullish financial developments have forced a huge amount of passive capital into commodities, especially the oil space."
It's been slightly more than a year since a barrel of crude soared close to US$150 a barrel. No one expects another run to those heights anytime soon, but even the prospect of increasing demand is sure to keep upward pressure on prices.
In a report yesterday, trader and analyst Stephen Schork said once oil gets to US$75, "there is not a hell of a lot to prevent it from going to US$80 or US$85."
Natural gas is another story. Prices are at seven-year lows and supplies continue to grow. Friday marked the 11th session out of 12 trading days in which gas prices fell.
"Demand prospects are the worst they have been in recent memory," said PFGBest Research analyst Phil Flynn.
It has been a very moderate summer and meteorologists are forecasting the same through the fall. That could drive natural gas prices down even further if people don't need as much heat for their homes.
U.S. gasoline prices have flattened and few expect a major run on prices as the driving season winds down.
Retail gas prices were almost unchanged overnight, falling to a new national average of US$2.626 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is US$1.062 cheaper than last year.
In other Nymex trading, gasoline for September delivery added 5.35 cents to settle at US$2.0491 a gallon and heating oil for September delivery rose about 1.85 cents to settle at US$1.9234 a gallon. Natural gas for September delivery rose 11.9 cents to settle at US$2.923 per 1,000 cubic feet after hitting a new 52-week low earlier in the day.
In London, Brent prices rose by 7 cents to settle at US$74.26 a barrel on the ICE Futures exchange.
Benchmark crude for October delivery rose 48 cents to settle at US$74.37 a barrel on the New York Mercantile Exchange. Oil last topped US$75 in October and yesterday, prices came within 19 cents of that mark.
Natural gas rebounded strongly from new seven-year lows yesterday, yet still traded below US$3 per 1,000 cubic feet because of a huge glut and very little demand from major industrial customers.
Expectations that demand for energy will grow, at least for oil and gasoline, were spurred Friday by Federal Reserve Chairman Ben Bernanke, who said the U.S. economy is reviving. Bernanke's remarks and signs of improvement in the U.S. housing market sent stock markets higher, and that carried over into the new week.
Even before Bernanke spoke, however, prices already had begun to rise on a large and unexpected drawdown in U.S. oil supplies. One factor that might be keeping crude below US$75 is the possibility that last week's storage report was an aberration, given that demand for now remains weak.
Equity and energy markets have been rising and falling in tandem for weeks and at the start of this week, it was more of the same.
Asian and European markets climbed yesterday, and the Dow Jones industrial average rose moderately in afternoon trading.
"No doubt about it, we're riding the wave of a strong stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "These bullish financial developments have forced a huge amount of passive capital into commodities, especially the oil space."
It's been slightly more than a year since a barrel of crude soared close to US$150 a barrel. No one expects another run to those heights anytime soon, but even the prospect of increasing demand is sure to keep upward pressure on prices.
In a report yesterday, trader and analyst Stephen Schork said once oil gets to US$75, "there is not a hell of a lot to prevent it from going to US$80 or US$85."
Natural gas is another story. Prices are at seven-year lows and supplies continue to grow. Friday marked the 11th session out of 12 trading days in which gas prices fell.
"Demand prospects are the worst they have been in recent memory," said PFGBest Research analyst Phil Flynn.
It has been a very moderate summer and meteorologists are forecasting the same through the fall. That could drive natural gas prices down even further if people don't need as much heat for their homes.
U.S. gasoline prices have flattened and few expect a major run on prices as the driving season winds down.
Retail gas prices were almost unchanged overnight, falling to a new national average of US$2.626 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is US$1.062 cheaper than last year.
In other Nymex trading, gasoline for September delivery added 5.35 cents to settle at US$2.0491 a gallon and heating oil for September delivery rose about 1.85 cents to settle at US$1.9234 a gallon. Natural gas for September delivery rose 11.9 cents to settle at US$2.923 per 1,000 cubic feet after hitting a new 52-week low earlier in the day.
In London, Brent prices rose by 7 cents to settle at US$74.26 a barrel on the ICE Futures exchange.
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