Oil Settles Back Below $80 Comfort Zone

Falling for the third consecutive session, U.S. crude oil futures came under pressure on the New York Mercantile Exchange Wednesday as traders sold off the energy commodity following the Department of Energy's confirmation of rising crude and gasoline inventories.

The price of light, sweet crude oil for February delivery, the contract of which expires on Thursday, tumbled more than $1 from yesterday's final price tag to close its session at $79.65 a barrel. Today's settlement is still at the higher end of its current trading range near an $80 comfort zone established during the latter half of 2009.

Weighing down Wednesday's oil futures, data out of the Energy Information Administration was in line with the American Petroleum Institute's expectations for a swell in petroleum supplies in the week to Jan. 8.

Specifically, U.S. crude inventories increased by 3.7 million barrels to 331 million barrels, and distillate stocks rose 1.4 million barrels to 160.4 million barrels. Crude stocks at the NYMEX Cushing hub, however, fell by 1.2 million barrels to 34.5 million barrels.

Market Corrects Oil Commodity Rush

"The market got a little ahead of itself last week when we pushed up through $82 and shot above $83," said Darin Newsom, senior analyst with DTN, a market information service in Omaha, Nebraska. "I think the market moved a little faster than what it might have been comfortable doing," he added. "With the way we've sold the market off [this week], it would certainly look like that."

Newsom continued, "We still don't have that bullish supply-and-demand situation that we've been needing. Stocks are starting to build again, but we're also seeing the contango in the futures spread weakening, so that indicates to me that we still have some commercial support in this market that will limit the size of this sell off."

Natural Gas Poised for Potential Run Up to $6

Gaining 14 cents at the close of today's session on the NYMEX, natural gas spot prices at the Henry Hub settled closer to the $6-pointmark at $5.733 per thousand cubic feet, in spite of warmer weather thawing its Northeast heating market.

For the natural gas commodity, Newsom still contends that there is some fundamental support the will push prices higher. "Yes, we've backed the market off a bit as the weather system across the Unites States has moved out finally, allowing for some warmer temperatures, but we're still in a situation of seasonal support in this market."

Newsom predicts that at some point natural gas futures will rise above a high of $6.13 to target a more bullish price tag of $8 -- albeit with some difficulty. "But if some of the other energy markets get excited," Newsom suggested, "I think natural gas will go along with them."