Oil prices rally, natural gas regains ground | VailDaily.com

Oil prices rally, natural gas regains ground

WASHINGTON – Crude-oil futures rallied more than $1 a barrel on Friday and the price of natural gas regained some ground after sinking a day earlier to its lowest level in four-and-a-half months.Light sweet crude for February delivery on the New York Mercantile Exchange rose $1.42 to settle at $64.21 a barrel. In London, Brent crude gained $1.28 to $62.41 per barrel on the ICE Futures exchange.Many factors have propelled oil prices from an average of $19.73 per barrel back in January 2002 to where it is today.Strong global demand and a thin supply cushion are the underlying reasons, analysts say, and because of these conditions every output disruption – or potential threat to disruption – feeds into a bullish outlook, sending prices higher. The war in Iraq, labor unrest in Nigeria and Gulf of Mexico hurricanes are just a few of production snags the industry has faced in recent years.But many analysts say the quick rise in oil prices at the start of 2006 has little to do with any change in the fundamental balance between supply and demand. Instead, they point to a 7 percent surge in the number of Nymex crude-oil contracts opened in the first two trading days of the year as a sign that hedge funds and other speculators continue to pour money into the market.”There’s an element of investment money where they could just as easily be trading GM, euros or oil, and those are the people that have come back into the market early in 2006,” said oil-market consultant Peter Beutel of New Canaan, Conn.-based Cameron Hanover Inc.”This has absolutely nothing to do with supply and demand,” Beutel said, though from a technical trading standpoint it is a very bullish trend.That said, “it is potentially catastrophic,” Beutel added. “If suddenly this market turns, you’ve got a lot of people who are not steeled in commodities and not aware of the dangers.”Natural gas futures rose 13.3 cents to settle at $9.632 per 1,000 cubic feet, retracing territory lost a day earlier as mild U.S. weather tempered traders’ supply concerns and the U.S. Energy Department released data that showed a surprising increase in natural gas inventories last week.February natural gas futures settled at $9.499 Thursday, the lowest settlement for the front-month contract since Aug. 19, when futures closed at $9.111.Nymex heating oil climbed 1.25 cent to $1.8006 a gallon on Friday and gasoline futures rose 2.85 cents to $1.8155 a gallon.Oil prices have been rising since mid-December, and analysts are cautioning that the cost of refined products such as gasoline are likely to rise as the year progresses. One analyst said gasoline could soar to $3 a gallon by summer.A mild start to winter has kept natural gas prices under pressure lately – the only logical trend in the energy market right now, according to Beutel – though the front-month contract hit a peak of $15.78 on Dec. 13.Vail, Colorado

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