Oil Futures Continue To Falter

Published on Thursday, 19 January 2012 17:16 Written by Todd Shriber

New York, January 19^th (TradersHuddle.com) – It was another glum day for crude futures after the Energy Department said gasoline demand plummeted to 8 million barrels per day last week, the lowest level in more than a decade. NYMEX-traded crude for February delivery lost 20 cents to close at $100.39 a barrel while ICE-traded Brent futures shed 89 cents to finish the day at $111.55 a barrel. While it appears West Texas Intermediate is finding support at $100 a barrel, today’s losses mark the fifth time in six days oil has traded lower.

Disappointing for oil bulls is the fact that futures were higher early in Thursday’s trading session due to the weekly jobless claims number that saw new claims plunge to 352,000 last week, marking the lowest weekly number since April 2008. The four-week moving average dropped to 379,000, the second-lowest reading in three years.

Natural gas prices are now in free fall and the same can be said of the U.S. Natural Gas Fund (NYSE: UNG). The controversial ETF dropped almost 6.2% today on volume that was more than triple the daily average. UNG is now down more than 55% in the past year and over 17% in 2012 alone.

Not surprisingly, the drop in nat gas futures has plagued Chesapeake Energy (NYSE: CHK), the second-largest U.S. nat gas producer. The stock was off 3.7% today on volume that was about 75% higher than the daily average. Oklahoma-based Chesapeake has been shedding shale gas assets at an impressive clip over the past several years and although the company appears committed to boosting its oil exposure through various U.S. shale plays, the market continues to view this as a nat gas play and that’s not good in the near-term as the stock is down almost 8% this week alone.

Looking at integrated names, BP (NYSE: BP), Europe’s second-largest oil company, closed higher today, no small feat given that a Morgan Stanley analyst said the company might have to pay as much as $25 billion dollars to settle criminal and civil lawsuits relating to the 2010 Gulf of Mexico oil spill, the largest oil spill in U.S. history. Despite the potential for big penalties against BP, the Morgan Stanley analyst forecast dividend growth of 5% this year and in 2013 for BP, which currently yields almost 4%.

Speaking of legal issues and oil, though on a much smaller scale, Exxon Mobil (NYSE: XOM), the largest U.S. oil company, will pay $1.6 million in penalties to the state of Montana related to a pipeline break there last year. Exxon will pay $300,000 in cash and spend $1.3 million on future environmental project and will reimburse more than $760,000 in emergency response costs racked up by state agencies, the Associated Press reported.