Crude Closes Below $80, Natural Gas Up on Commercial Buying

Oil futures traded slightly lower Thursday, dipping below $80 a barrel on the New York Mercantile Exchange as doubts surfaced concerning an elusive pickup in oil demand while the economy is on the mend. Conversely, the price of natural gas closed higher today compared to other energy commodities, but still settled below a $5-threshold established last month.

The price of light, sweet crude oil for December delivery traded 77 cents lower on the NYMEX Thursday, ultimately settling to $79.63 per barrel.

Oil Price Folds Under High Stockpiles

"Today, despite the huge rally in the Dow Jones, most commodities, including crude oil, did not find that spec or investment buying. We've seen it all week long, and we've either burned through the orders or they [the investors] have moved on to something else and just weren't interested in stepping over into commodities," Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska, observed.

"That being the case, most of them had to fall back on their fundamentals. Crude oil, along with some of the others, still have bearish underlying fundamentals, just allowing the markets to drift lower today," the analyst said, referring to the market's focus on a build in product stocks.

Specifically, U.S. distillate stocks reportedly fell by only 400,000 barrels compared to an anticipated 1-million-barrel decline, signaling still-weakened energy demand.

Recently, investors have been purchasing the oil commodity based on a spectrum of macroeconomic data that has increasingly confirmed a recovering economy. Today, however, a rally in the equities market did little to push oil prices close to an $82-a-barrel high reached in October.

"Oil's comfort zone is now around $80," Newsom emphasized."It doesn't want to stray too far above that, and it doesn't really want to dip very far below that."

Natural Gas Buoyed by Investor Flows

Despite a drop in other energy commodites, natural gas futures rose slightly to settle at $4.818 per thousand cubic feet on the NYMEX Thursday.

"Natural gas prices remain and oddity," Newsom noted. "Often, natural gas does tend to move in the opposite direction as some of the other markets, so with the other energies under pressure today, we did see some of that buying coming into natural gas," the analyst said.

"To me, technically, it's still going back to the bullish signal it established at the end of September, and we've slowly been building on that," Newsom explained. "On top of that, we've also been seeing the spreads weakening, meaning we've got some commercial support for this market," he concluded.