Commodity Corner: Turmoil Continues, Crude Surges
Crude futures surged Thursday with an upcoming market holiday and heightening political tensions in the Middle East.
Oil prices rose 1.6 percent on news of clashes between protesters and police in Bahrain, Yemen, and Libya, along with reports of Iran sending two warships through the Suez Canal. After Saudi Arabia, Iran is the second-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC). Libya is the eighth-biggest oil producer on OPEC's top producer list.
The New York Mercantile Exchange will be closed on Monday in observance of President's Day, and the current contract will end the following day. Traders are concerned that with an increase in pro-democracy demonstrations, disruptions in oil supply may soon follow. Adding to the market tension, the upcoming three-day holiday has also pressured crude prices.
Light, sweet crude for March delivery gained $1.37 to settle at $ 86.36 a barrel, after fluctuating between $84.38 and $86.63.
As crude ascended, the Brent benchmark descended. The European Brent lost $1.19 Thursday, narrowing the spread—the difference between the two contracts. Brent peaked at $103.78 Wednesday, the highest since Sept. 28, 2008.
Meanwhile, the natural gas futures price continued its descent to a three-month low Thursday. Front-month natural gas fell to $3.87 per thousand cubic feet despite government reports showing lower-than-expected inventories; milder weather forecasts held greater sway over the futures price than the inventory data. According to the U.S. Energy Department, stockpiles were at 1.911 trillion cubic feet—a decrease of 233 billion cubic feet for the week ended Feb. 11.
The intraday range for natural gas was $3.83 to $3.95 Thursday.
Likewise, gasoline futures also fell. Reformulated gasoline blendstock settled down at $2.53 a gallon after trading between $2.523 and $2.555 Thursday.