Crude Gains Slightly in Trading Thursday
by Rigzone Staff
|Thursday, July 09, 2009
Crude oil on the New York Mercantile Exchange buoyed a bit in trading on Thursday, closing just above yesterday’s settle and fueling hopes that the market may have seen the bottom of the last week’s correction in price.
On the NYMEX Thursday, crude oil rose 27 cents to settle at $60.41 a barrel. This is after a more than $10 drop in prices in the last few weeks, despite a major rally that brought oil prices from the low $30s earlier this year to a high of near $73 per barrel.
“We’re trying to find a fundamental price that makes sense for real buyers and real sellers, as opposed to people pushing commodity prices,” said Brian Uhlmer, research analyst with Pritchard Capital in Houston.
While hopes of an economic turnaround have been dimmed, weak fundamentals, including waning demand in the US, the world’s largest consuming country, have been blamed for the recent $10 drop in the price of oil.
“What was happening was China had this demand that was soaking up excess inventory; so imports to the US were down, which lead speculators to get ahead of that and start buying, and the price was artificially inflated with the lack of demand,” explained Uhlmer. “The Chinese did not want to play that game and keep buying at those levels. They backed off, imports have increased, and prices have come back down to a level that appears reasonable.”
The question remains, how low will oil go? Will the industry see the drastic drop that occurred after oil reached above $130 last summer?
“Our thesis is somewhere between $55 and $65 is a good point to where we don’t suppress economic development and make the recession last longer, but that oil producers can actually earn a profit, as well,” predicted Uhlmer.
Natural Gas on Its Way Up?
On the NYMEX Thursday, natural gas gained slightly, settling at $3.408. Because this energy commodity is a domestic product, poor demand and oversupply have thwarted any price increase as of late.
Despite this, the analyst believes that the price of natural gas is on the mend.
“We believe the Barnett Shale is in decline, and that other producing regions’ declines will be seen when we start to see June data,” Uhlmer stated. “Once people believe there is a production decline, gas will come back to a more reasonable level closer to $5.”