Natural-gas prices hang onto highest levels in 20 months
By Myra P. Saefong and Carla Mozee, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures dropped on Friday, as declines in U.S. retail sales and consumer sentiment, renewed worries over Cyprus and recent downgrades to global oil-demand forecasts combined to set prices up for their lowest close in over a month.
May crude oil CLK3 -2.71% lost $2.45, or 2.6%, to $91.06 a barrel on the New York Mercantile Exchange, facing a 1.8% drop on the week.
Tracking the most-active futures contracts, prices were poised for their lowest close since early March, according to FactSet data.
“The oil story is coming into greater focus, that the preponderance of the evidence globally points to a massive, long-term flattening out of oil demand,” said Richard Hastings, macro strategist at Global Hunter Securities.
That’s happening “as efficiencies and emissions regulations grow, and natural gas threatens fuels, diesel and heavy distillates fuel demand globally over the next five years,” he said.
The latest pronouncements from the International Energy Agency Thursday brought more attention to this, so the pressure is building, and now we can see it in the market action, he said.
Crude on Thursday dropped $1.13, or 1.2%, to $93.51 a barrel after the IEA said it now expects global oil-demand growth of 795,000 barrels a day, down from a previous forecast of 820,000 barrels a day.
The move from the Paris-based agency reflects exceptionally weak demand from industrialized countries, particularly in Europe, where consumption this year is expected to be the lowest since the 1980s.
On Wednesday, the Organization of the Exporting Countries cut its global oil-demand estimates for the year slightly, saying financially troubled Cyprus is now another point of worry in the euro zone.
Pressure builds
Disappointing data on the U.S. economy and euro-zone concerns were also to blame for oil’s plunge Friday.
“Falling oil prices often coincide with economic weakness,” said James Williams, energy economist at WTRG Economics, adding that the “old saying that high oil prices cause recession is just as true the other way around. Weak economies cause low oil prices.”
“The problems in Europe and the U.S. are beginning to impact Asia which for some time has been the source of growth in petroleum consumption,” he said.
Media reports said Cyprus was asking for extra assistance from the European Union to help get the country back on track amid financial turmoil, but the nation’s finance ministry quickly denied the reports. Financial woes in Cyprus have revived concerns about energy demand from Europe.
In the U .S., March retail sales fell 0.4% — below the MarketWatch forecast of a 0.1% decline and a gauge of consumer sentiment dropped in early April to the lowest level in nine months.
The negative news just keeps coming, said Williams, with consumer confidence adding another layer of negative news impacting the oil price.
On Nymex, the $90 is something to watch, along with the $100 level for Brent crude, he said.
“Both are within a dollar of big psychological support big numbers. If both of those support levels are broken, the last two weeks may only be the beginning,” he said.
In London, May Brent crude UK:LCOK3 -2.16% traded at $101.69 a barrel on ICE Futures, down $2.58, or 2.5%.
Rounding out action on Nymex Friday, May gasoline futures RBK3 -1.25% fell 4 cents, or 1.3%, to $2.79 a gallon. The contract had fallen nearly 4% in the previous two sessions. The U.S. Energy Information Administration on Wednesday showed an unexpected increase in stockpiles for the week ended April 5.
Gasoline futures are set to close at their lowest since mid-January. For the week, they’re down about 2.5%.
May heating oil HOK3 -1.31% sank 4 cents, or 1.4%, to $2.86 a gallon. Tracking the most-active contracts, prices haven’t closed at levels this low since August 2012 and for the week, they’re down 1.8%.
Natural gas was again the lone gainer. May natural-gas futures NGK13 +2.10% rose nearly 9 cents, or 2.1%, to $4.23 per million British thermal units. Prices were ready for their highest close since July 2011, trading up about 2.5% for the week.
Natural-gas futures on Thursday jumped 1.3% after news that U.S. supplies of natural gas in storage remained at their lowest level in roughly two years.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
