$100 Oil No Cause for Panic

NEW YORK ( TheStreet) -- U.S. oil prices were falling on fears of economic collapse in Europe Thursday, but remained above the psychologically important $100 level.

But there's no need for consumers to panic right now, according to energy analysts. West Texas Intermediate, or WTI, crude prices are merely playing catch-up with global oil, such as the European Brent benchmark -- and gasoline prices have been following Brent prices for almost the entire year. So have heating oil and jet fuel prices.

"In terms of headline movements, products are following Brent, not WTI, so the move in WTI in the last few days should really be a moot point," says Matt Smith, commodity analyst at Schneider Electric's Summit Energy.

"So far, not any worry," said Cameron Hanover energy analyst Peter Beutel. "Yesterday, it was just WTI returning to its proper place in relation to Brent," he agreed.

"Except for refineries in the main U.S. oil storage hub Cushing, Okla., which have been making a fortune, refineries along the coast have been paying prices in line with Brent for their crude oil," said SEB analyst Filip Petersson.

January WTI futures were falling $1.47 to $101.13 a barrel and the February Brent contract was behind by $1.51 at $110.

As WTI oil prices shot past $100 a barrel Wednesday, New York Mercantile Exchange (NYMEX) oil trader Dan Dicker reassured panicking consumers.

They are "gritting their teeth in horror as WTI oil prices seem to be going straight up," he said. However, "gasoline, heating oil and jet fuel prices are moving down, not up."

Indeed, the national average price of gasoline has been at $3.41 a gallon, which is notably less than the average price at the pump of $3.50 to $3.90 from Feb. to March of this year, according to a GasBuddy.com report. This, as Brent crude prices cooled slightly over the last three months and refinery utilization and gasoline production increased.

Gasoline futures are at their lowest level since Feb. and that's facilitating the seasonal decline for wholesale and retail prices, the GasBuddy.com report said.

Analysts are now paying close attention to Brent prices to clue in on where gasoline, as well as heating oil and jet fuel prices might be heading. SEB is playing it conservative. "While we still acknowledge an upside risk to our forecasts, we maintain a conservative stance due to lacklustre 2012 Organisation for Economic Co-operation and Development growth forecasts and uncertainty regarding China's exit strategy," says Petersson.

SEB analysts have raised their average fourth quarter Brent price forecast by $5 a barrel to $115 a barrel; their 2012 forecast by $4 a barrel to $114 a barrel; and their 2013 forecast by $5 a barrel to $120 a barrel on factors such as higher geopolitical risk relating to the resurfacing of Iranian nuclear issues, less likelihood of a U.S. recession, the upcoming heating season and a tightening long-term market supply-demand outlook.

"We expect a highly volatile market over at least the next six months with the European debt crisis continuing and further effects from Chinese monetary tightening."

The much talked about potential, longer-term decline of the U.S. dollar, which would help drive oil prices higher, is also a factor that WeatherBELL Analytics' energy analyst Alan Lammey is paying close attention to.

Ultimately, "both gasoline and heating oil prices remain at the mercy of the economic environment," Smith of Summit Energy summed up.

"Should the U.S. economy improve, crude prices will rise, and hence so will gasoline and heating oil," he said. "However, if we see further deterioration in the European debt crisis, there will be a negative ripple effect on the US economy, and product prices will likely fall."

The much-anticipated break of oil prices above $100 a barrel kicked in Wednesday on news that Enbridge ( ENB) and Enterprise Products Partners ( EPD) have agreed to open a crucial US oil artery by mid-2012.

The move to reverse the Seaway pipeline by the end of the second quarter of 2012 will allow U.S. oil to flow more easily from the country's major storage hub in Cushing, Okla. to Gulf Coast refiners. As a result, WTI prices will more accurately reflect global market price conditions and are soon expected to trade more closely with Louisiana Light Sweet Crude, which has for months been trading at the same or even higher prices than Brent.

Energy stocks were mostly falling Thursday. BP ( BP) was falling 0.8% to $43.17; Apache ( APA) was down 0.4% to $102.30; EOG Resources ( EOG) was lower by 0.3% to $100.41; Chesapeake Energy ( CHK) was behind by 0.6% to $25.32; Triangle Petroleum ( TPLM) was higher by 1.1% to $6.27; Southern Union ( SUG) was flat at $41.95; and Anadarko Petroleum ( APC) was down 0.4% at $78.63.

-- Written by Andrea Tse in New York.

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