Commodity Corner: Ben, Irene Contribute to Volatility

- Commodity Corner: Ben, Irene Contribute to Volatility

Friday, August 26, 2011
Rigzone Staff
by Matthew V. Veazey

The price of a barrel of light sweet crude oil experienced some volatility Friday before settling at $85.37, or just seven cents day-on-day.

The WTI fell as low as $82.95 after Federal Reserve Chairman Ben Bernanke, speaking at a symposium in Jackson Hole, Wyo., did not announce any Fed plans to launch a third round of quantitative easing. A "QE3" would be bullish for oil and other commodities because it would weaken the U.S. dollar.

Hurricane Irene's pending arrival along the East Coast did create upward momentum for the benchmark, however. The WTI peaked at $85.64 as investors weighed the possible effects the storm may have on refining infrastructure and gasoline supplies in the Mid-Atlantic and Northeast.

The Brent contract price also settled higher Friday, gaining 74 cents to end the day at $111.36 a barrel. It traded within a range from $109.38 to $111.65.

Despite Irene's potential impact on East Coast fuel supplies, reformulated gasoline lost four cents to settle at $2.93 a gallon. The U.S. Coast Guard's lack of a decision during floor trading to close New York Harbor prevented a bullish outcome Friday.

September gasoline peaked at $2.98 and bottomed out at $2.91 during the pre-storm session.

Natural gas for September delivery settled flat at $3.93 per thousand cubic feet. It fluctuated from $3.90 to $3.96.

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Commodity Corner: QE3 Expectations Boost Oil

- Commodity Corner: QE3 Expectations Boost Oil

Friday, July 15, 2011
Rigzone Staff
by Matthew V. Veazey

Light sweet crude oil for August delivery rallied Friday on expectations that a third attempt by the Federal Reserve to stimulate the economy would be bullish for commodities.

After reaching $97.74 and bottoming out at $95.21, the WTI gained $1.55 for the day to settle at $97.24 a barrel. The September Brent contract traded within a range from $115.25 to $117.65 before ending the day at $117.26, representing a $1.00 gain from Thursday. The August Brent contract, which expired Thursday, had settled at $118.32.

Testifying before a congressional panel this week, Fed Chairman Ben Bernanke roused markets Wednesday by suggesting that the Federal Reserve may launch a third round of quantitative easing. The "QE3" strategy would aim to improve liquidity in the U.S. economy by printing more money to buy Treasury bonds, encouraging banks to pursue riskier investments by boosting lending to businesses and consumers. Because more money would be available to banks, the value of the U.S. dollar against other currencies would diminish. Hence crude oil would be a better buy for investors using currencies other than the greenback.

On Thursday, the dollar gained strength and oil futures plunged after Bernanke stressed that the Fed had no immediate plans to set QE3 in motion. Investors on Friday, however, appeared to assume that such a policy decision would eventually be implemented.

With temperatures expected to approach or perhaps exceed the triple digits from the Upper Midwest to the East Coast, demand for electricity to power air conditioners and fans is set to be high well into next week. As a result, August natural gas surged well over four percent before ending the day at $4.55 per thousand cubic feet.

The front-month contract price for gas traded from $4.38 to $4.56 Friday.

Gasoline for August delivery edged upward by one cent to settle at $3.13 a gallon. The intraday high and low prices for gasoline were $3.15 and $3.10, respectively.

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