Big Advance for Crude - TheStreet

Big Advance for Crude

Near-month oil rises $1.84 to close at $63.85 a barrel.
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Energy futures surged Thursday at the New York Mercantile Exchange, closing the session near their highs for the day, as traders continued to be influenced by concerns about tight energy inventories.

The May light sweet crude contract added $1.84 to close at $63.85 a barrel. Reformulated gasoline reached its highest price since last August, climbing 4 cents to $2.19 a gallon.

Heating oil rose 4 cents to $1.91 a gallon, and the near-term natural gas contract advanced 6 cents to end at $7.92 per million British thermal units.

Earlier, the Energy Information Administration unveiled new natural gas inventory figures for the week ended April 6 that showed an injection of 23 billion cubic feet. The reading was mostly in line with analysts' estimates.

So far this spring, the U.S. has been receiving more liquefied natural gas than normal because prices are higher here than in Europe, according to John Herrlin, an analyst at Merrill Lynch. The increase in LNG imports is compensating for a reduction in natural gas imports from Canada, where overall production has recently tapered off.

With less natural gas coming from Canada and "a reduction of LNG (as Europe heats up), the U.S. could have a more difficult time filling storage should U.S. weather truly be hot," Herrlin wrote in an emailed statement. "We think the market may be discounting that likelihood now."

Also of note in recent days is a widening of the price differential between the Nymex light sweet crude contract, based in Cushing, Okla., and the European Brent crude contract, traded on the Intercontinental Exchange. The Brent contract was recently at $68.75 a barrel on the ICE exchange.

Refinery problems in the Texas and Oklahoma region have created a crude supply glut near the Cushing hub, keeping the price of light sweet crude (also known as WTI) down, according to Ed Meir, an energy analyst at Man Financial. Additionally, a drop in exports from Nigeria because of the escalated violence there is boosting the price of Brent crude.

The spread between the May Brent and WTI contracts is around $5 a barrel, whereas the spread for the July contracts is currently about $3. This presents an arbitrage opportunity for traders, since the spread between the July contracts will likely widen toward $5 as their expiration approaches, Meir said.

"I would take a long position on the Brent contract and go short on the WTI contract," in order to take advantage of the disparity, Meir said.

Meanwhile, energy stocks were buoyed by higher commodity prices and ended the day higher. The

CBOE Oil Index

climbed 1.6% to 679.64.

ConocoPhillips

(COP) - Get Report

moved 1.8% higher to $70.49.

Chevron

(CVX) - Get Report

finished up 0.8% at $77.17, and

Exxon Mobil

(XOM) - Get Report

advanced 0.8% to $77.39.