Energy prices were broadly lower on Monday after traders reacted to bearish comments made over the weekend by Saudi King Abdullah. The near-term contract for light sweet crude oil edged 2 cents lower to $63.61 a barrel. Reformulated gasoline fell 6 cents to $2.11 a gallon, and heating oil was off 4 cents at $1.86 a gallon. The May natural gas contract slid 27 cents to $7.53 per million British thermal units. During the past weekend, King Abdullah said that Saudi Arabia is seeking a "fair price" for oil that benefits both producers and consumers. Traders perceived these comments as bearish given that Saudi Arabia has been ramping up its production in recent months, according to Dennis Gartman, publisher of The Gartman Letter, in an email. Also of importance is the diverging price spread between the WTI crude contract, traded on the New York Mercantile Exchange, and the Brent crude contract, traded on the Intercontinental Exchange. The near-term WTI contract has risen $1.95 since the first of March, while the Brent contract has climbed $6.89 over the same period. The widened spread between WTI and Brent suggests that "the WTI futures contract is broken; i.e., it no longer reflects global energy price movements and reflects instead the vagaries of refinery operations in the Midwest," and other infrastructure problems near the Cushing, Okla., hub, Gartman wrote.
According to Gartman, the long-term repercussions of this could be that Brent becomes a more-important indicator of energy markets, while the WTI contract could lose its relevance. Energy stocks ended the session slightly higher. The CBOE Oil Index was up fractionally at 684.81. ConnocoPhillips ( COP - Get Report)finished almost flat at $70.57. Chevron ( CVX - Get Report) advanced 1.1% to $77.87, and Exxon Mobil ( XOM - Get Report) climbed 1% to $78.16. Among the day's analyst actions, BJ Services ( BJS) and Nabors ( NBR - Get Report) were upgraded by Lehman Brothers to overweight from equal weight, and shares of both rose. Among downgrades, Ensco International ( ESV) was cut by Lehman to equal weight from overweight. The firm's stock was down 0.4% at $55.51. Tidewater ( TDW) and Trico Marine Services ( TRMA) were mixed after getting reduced by Lehman. Tidewater rose slightly to $61.72, while Trico fell 3.4% to $39.73. Citigroup downgraded shares of Valero ( VLO - Get Report) and Tesoro ( TSO) to hold from buy. Their shares finished at $66.92 and $110.52, respectively. Valero's McKee refinery in Sunray, Texas, resumed partial operations late last week. The refinery has been offline since it was disabled by a fire on Feb. 16.