Cold Holiday Weather Helps Support Oil & Gas Prices

Oil prices seem to have taken the place of the Fed in headlines and market focus. Equities, metals and currencies are responding to the ups and downs of the black liquid. Regardless of headlines, production levels and quota and rumors the fact remains that global stocks of oil are overloaded and it will take years to use the current supplies. A recent report from OPEC indicated that the energy sector will not return to a more normal position until 2020. World oil production this year has exceeded demand by 2 million barrels per day at times. In 2016, Iran is expected to add its exports to the mix after Western sanctions on its oil come off.

“Iran is gearing up to flood the market with 500,000 bpd within weeks of sanctions being lifted,” noted Ole Hansen, head of commodity strategy at Saxo Bank.

This morning oil took a big tumble giving back yesterday’s gains as traders begin to fall into a daily pattern. Crude oil is trading at 37.20 down 68 cents and Brent oil is down 28 cents at 37.33. The surprise action in the energy sector has been the soaring price of natural gas, which just a week ago was close to a 20-year low below the $2 level. This morning natural gas is trading at 2.334 up by 18 points as cold weather blankets the US.

On Tuesday Traders welcomed a break in the decline in crude oil prices. Benchmark U.S. crude rose $1.06, or 2.9 percent, to close at $37.87 a barrel on the New York Mercantile Exchange, recovering after a slump Monday. Brent crude, which is used to price international oils, gained $1.17, or 3.2 percent, to close at $37.79 a barrel in London.

In other energy trading in New York, wholesale gasoline rose 4.3 cents, or 3.5 percent, to $1.276 a gallon, and heating oil rose 3.9 cents, or 3.6 percent, to $1.23 a gallon. U.S. heating oil, also known as Ultra-Light Sulfur Diesel (ULSD), partly fed Tuesday’s gains in crude, rising nearly 4 percent to above $1.13 a gallon. ULSD and natural gas, another heating fuel, have rallied this week on cold weather expectations

Oil prices jumped 3 percent recouping the previous day’s loss as colder weather encouraged buyers, but traders said prices remained under pressure due to slowing global demand and abundant supplies from OPEC members. After settlement, industry group the American Petroleum Institute (API) reported a weekly rise of almost 3 million barrels in U.S. crude inventories, not the draw expected by many analysts and traders.

Global oil benchmark Brent and U.S. crude’s West Texas Intermediate (WTI) futures settled up more than $1 a barrel, after weather forecasts showed the United States may get some cold winter temperatures following an unusually balmy autumn. Oil prices gave much of the day’s gains after the API report. weather data in Thomson Reuters shows that average continental European temperatures are expected to drop from around 5 degrees Celsius currently towards and slightly below the seasonal norm of 2.4 degrees by January 3 before rising to as high as 6-8 degrees by January 7.

For most of the United States, a brief cold period is also not expected to last for much more than a week.