Energy Futures Waver, Gas Prices Rise

Energy futures fluctuated Thursday, buffeted by slower-than-expected economic growth figures and Wednesday's government report of a sharp decline in inventories.

Selling by investors to lock in profits from the previous day's rally also pressured prices, analysts said.

Gas prices at the pump, meanwhile, climbed again overnight. Retail prices, which typically lag the futures market, are rising as retailers buy gasoline to supply drivers over the coming Labor Day weekend.

"People are expecting the one last surge in demand," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass.

But longer-term demand concerns remain. Second-quarter gross domestic product rose 4 percent in the second quarter, slower than many analysts had expected. And jobless claims rose unexpectedly last week to the highest level since spring.

"The concern is that we're going to see some weakness," Lynch said.

Energy investors worry that a slower economy means less demand for oil and gasoline.

Light, sweet crude for October delivery fell 29 cents to $73.22 a barrel on the New York Mercantile Exchange, while September gasoline fell 4.13 cents to $2.0595 a gallon. Both contracts alternated between gains and losses.

Gasoline and oil futures rose sharply Wednesday after the government reported surprisingly large declines in inventories of both on an unexpected drop in refinery activity.

In London, October Brent crude fell 33 cents to $71.80 a barrel on the ICE Futures exchange.

At the pump, meanwhile, gas prices rose 1.1 cents overnight to a national average of $2.769 a gallon, according to AAA and the Oil Price Information Service. Gas prices peaked at $3.227 in late May as refineries struggled to produce enough gas to meet peak summer driving demand.

With the summer almost over, refiners are switching over to produce more heating oil, analysts say. That has some analysts worried anew about gasoline inventories, which are at 2-year lows. But others think the inventory drop is a natural reaction by refiners to lower anticipated fall demand.

"We would not get too concerned about gasoline right now," wrote MF Global UK Ltd. analyst Edward Meir in a research note. "The U.S. driving season is officially ending after one 'last hurrah' this coming weekend."

Retail prices are responding in part to the futures market, where prices has risen over the last week in response to lower gasoline supplies. But contributing to higher prices is buying by retailers anticipating a jump in demand over the holiday weekend, analysts said.

In other Nymex trading, heating oil futures fell 1.09 cents to $2.031 a gallon, and natural gas futures rose 8.9 cents to $5.67 per 1,000 cubic feet after the government reported that inventories rose by 43 billion cubic feet last week, slightly less than analysts were expecting.

Natural gas supplies are at record levels, which has kept prices below year-ago levels. Heating oil inventories, on the other hand, are lower than they were a year ago, which has driven prices higher. The result could be lower heating bills this winter for natural gas customers, and higher bills for heating oil customers.
Source : http://www.forbes.com