Wall Street Gains Help Catapult Oil Price
U.S. crude oil futures ended a week-long losing streak to close above $79 on the New York Mercantile Exchange, the price per barrel recovering in spite of ballooning petroleum stocks as Wall Street posted substantial gains on Tuesday.
In a single trading session combining Monday and Tuesday's prices following Martin Luther King, Jr. Day, the price of light, sweet crude oil for February delivery added more than $1 to last week's final price tag, the energy commodity closing higher at $79.02 a barrel.
On the opposite side of the energy coin, natural gas spot prices at the Henry Hub closed down to $5.557 per thousand cubic feet, the commodity's bullish sentiment losing steam on warmer temperatures across the U.S. Northeast, the world's largest heating market.
Analysts Bet on $70-$80 Range
"After opening prices were significantly weaker overnight, we did see the market rally today," commented chief markets strategist Bill O'Grady at Confluence Investment Management, LLC. However, the analyst pointed out that the oil market is heading into a lull period for consumption, with prices bound in the $70-$80 range.
"The market's been down hard for the past week," O'Grady reflected. "Oil to some extent is probably still technically oversold and was due for some short-covering."
On Monday, the head of commodities research at financial heavyweight Goldman Sachs said talk of $100 crude is "premature" when juxtaposing what many analysts believe are "oversold" prices to lackluster oil demand in developed countries still recovering from economic hardship.
Speaking at Goldman Sachs' Global Strategy Conference, Jeffrey Currie forecast that such demand would potentially rebound in the third quarter, but the analyst also contends that 2011 and 2012 will become "a really tight market."
Oil Tracks Outside Markets
"The stock market had a good day, which helped prices, the theory being that if the stock market does better, it could be a reflection of the economy, and anything that reflects a better economy tends to support energy consumption," O'Grady said.
Unable to pinpoint any obvious fundamental stimulus outside of the financial market that helped spur purchasing for NYMEX crude, O'Grady suggested that increased weekly gasoline consumption seemed the only bullish fundamental news of the day.
Specifically, gasoline demand averaged 9.410 million barrels per day during the week to Jan. 15, or 3.2% higher than the previous week, according to a MasterCard SpendingPulse report. Despite this, petroleum products are in a state of influx from weakened demand on a global scale.
The world's largest oil cartel, OPEC said in its monthly report that "given the overhang in middle distillate inventories and the slow recovery in products demand, product market circumstances are not expected to support crude fundamentals." The group trimmed its demand forecast by 20,000 bpd to 28.59 million bpd.