Investors focus on impact of Japan’s devastating earthquake
By Claudia Assis and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures fell Monday on worries the massive earthquake in Japan and the resulting impact on the nation’s refining capacity could crimp near-term demand.
Crude oil for April delivery (CLJ11 99.84, -1.32, -1.31%) dropped 99 cents, or 1%, to $100.12 a barrel on the New York Mercantile Exchange. It earlier hit an intraday low of $98.47 a barrel, but subsequently trimmed its decline.
The losses were on top of the $1.54 fall on the New York Mercantile Exchange on Friday. Read Friday’s futures movers story.
Prices were overbought last week and even with the recently lowered prices “we feel in our hearts that it would be best to wait before doing any fresh buying, but our heads tell us we should use dips to hedge at least half our needs,” analysts at Cameron Hanover said in a note to clients Monday.
The buying urgency has diminished after the lack of bloodshed in Saudi Arabia on Friday, they added.
Monday’s decline came as Japan struggled to deal with the aftermath of the worst-ever earthquake recorded in the nation’s history, estimated to have killed thousands and caused widespread damage, especially in northern Japan.
Analysts at UBS, however, see a minimal impact to the “global crude-oil balance.” They said that the earthquake had affected 12 nuclear plants with about 11,270 megawatts of capacity, which may remain shut for an extended period in view of the damage caused by the temblor.
That would boost demand for other fuel sources in due course, especially for natural gas and oil, UBS estimated. Even so, the Organization of Petroleum Exporting Countries could meet incremental oil demand from its spare capacity.
“Higher oil demand for electricity generation may be offset by demand loss from refinery shut-ins and economic weakness,” UBS analysts said. They noted that at least five refineries with a combined capacity of about 26% of Japan’s total capacity were shut down in the wake of the earthquake.
Despite the attention toward the tragedy unfolding in Japan, events in the Mideast and North Africa remain a “much more important driver of oil balances and price,” analysts at J. P. Morgan said in a note to clients Monday.
On Monday, pro-government forces in Libya advanced in rebel-held areas in the east as the tide appears to have turned in favor of Col. Moammar Gadhafi.
Other energy products were mixed, with gasoline lower and heating oil trading higher. Natural-gas futures rose.
April gasoline (RBJ11 2.95, -0.04, -1.34%) declined 3 cents, or 1.2%, to $2.95 a gallon. April heating oil (HOJ11 3.03, +0.01, +0.16%) rose a penny, or 0.4%, to $3.04 a gallon.
Natural gas for April delivery (NGJ11 4.00, +0.12, +2.96%) advanced 11 cents, or 2.9%, to $4 per million British thermal units.
