Market watch: Record low US oil stocks spark jump in energy futures prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 3 -- Energy futures prices jumped Thursday on the New York Mercantile Exchange with reports that US oil inventories had fallen to record lows with disruption of Venezuelan imports and forecasts of more seasonal and stormy weather in the US.

The US Energy Information Administration and the American Petroleum Institute reported Thursday that US oil stocks fell by 9.1 million bbl last week. API said US oil imports dropped by 1.2 million b/d to 7.7 million b/d during that same period, while imports of petroleum products were down 604,000 b/d to 2.3 million b/d (OGJ Online, Jan. 2, 2003).

A general strike now in its fifth week has slashed Venezuela's oil production to less than 200,000 b/d from 3.1 million b/d in November. Venezuela's oil exports, primarily to US refiners, averaged just over 230,000 b/d in December, down drastically from 2.7 million b/d in November.

The long-running strike is aimed at forcing Venezuelan President Hugo Chávez out of office. Following a meeting in Brazil with Cuban leader Fidel Castro, Chávez claimed Thursday that his administration has broken the strike and increased production by Petroleos de Venezuela SA (PDVSA), the state oil company, to 800,000 b/d. He said production would be restored to 3 million b/d in 45 days.

Chávez attended the inauguration Wednesday of Luiz Inácio Lula Da Silva, Brazil's new president, and asked him to send experts from Petroleos Brasileiro SA (Petrobras), the state oil company, to help restore PDVSA production.

However, PDVSA strike leaders claimed that production is still reduced to a relative trickle of less than 200,000 b/d and that it would take at least 4 months to bring the company up to previous production levels when the strike ends. They also predicted that, with production at such a low level, Venezuela's oil exports would grind to a halt as soon as the 8 million bbl of oil in storage at export terminals is emptied.

Meanwhile, Chávez has arranged imports of 1.72 million bbl of gasoline from Brazil, Russia, and Trinidad and Tobago for Venezuela's domestic market, which is estimated at 200,000 b/d. The strike has virtually closed all refineries in Venezuela.

Such "work-arounds on the part of Chávez help the leader maintain his hard line stance against the strikers. However, his claims that the country can be at full production of 3 million b/d within 30-45 days are likely too aggressive still," said Tyler Dann, an industry analyst in the Houston office of Banc of America Securities LLC.

The February contract for benchmark US light, sweet crudes jumped 65¢ to $31.85/bbl Thursday on the New York Mercantile Exchange, more than recouping Tuesday's loss. The March position increased 51¢ to $31.10/bbl. Unleaded gasoline for February delivery gained 1.33¢ to 88.3¢/gal, while heating oil for the same month was up 1.23¢ to 88.09¢/gal.

Some analysts said prices would have soared higher if not for speculation that other members of the Organization of Petroleum Exporting Countries might increase their production by 500,000 b/d to help offset the loss of Venezuela's oil and drive down high prices.

However, Dann said his company's "reactionary OPEC" analysis "suggest that the group as a whole increases (or) decreases production in response to oil price movements on a 1-month lag, with a ratio of 267,000 b/d of supply increase (or) reduction for every $1/bbl shift in the prior-month's OPEC basket price." In December, OPEC's basket price averaged $27.86/bbl, still within the group's target range of $22-28/bbl. OPEC's basket price increased 20¢ Thursday to $30.05/bbl.

Moreover, Dann said, "capacity restraints faced by much of the organization outside of Saudi Arabia" would prevent a substantial production increase by most OPEC members.

Mexico and Venezuela are the main suppliers of heavy oil to US Gulf Coast refineries designed to handle only that feedstock. Venezuela accounts for 42% of heavy crude supplies to those refineries.

Saudi Arabia produces heavy oil. However, tanker shipments from the Middle East take 5 weeks to complete, compared with 5 days from Venezuela (OGJ Online, Dec. 17, 2002).

Citgo Petroleum Corp., PDVSA's US refining and marketing affiliate, has been hardest hit by the strike since it relies on Venezuela for about 50% of its crude under long-term contracts. However, PDVSA Pres. Alí Rodríguez Araque denied reports Thursday that PDVSA plans to sell or otherwise dispose of Citgo or any of its assets.

Natural gas shot past $5/Mcf again Thursday, with the February contract jumping 46.2¢ to $5.25/Mcf. "Buying, driven by locals and funds, pushed the market toward highs last seen in mid-December," analysts at Enerfax Daily reported Friday. "Besides the cold forecast, funds were busy buying after picking up end-of-year profits. It is unusual that the market went up so high, but with the volatility of late, it is not totally unexpected."

EIA reported Friday that 123 bcf of gas was withdrawn from US underground storage during the week ended Dec. 27. That was up from 95 bcf the previous week, but down from 127 bcf during the same period last year. US gas storage now stands at 2.4 tcf, down 572 bcf from year-ago levels and 95 bcf below the 5-year average.

In London, the February contract for North Sea Brent oil gained 77¢ to $29.43/bbl on the International Petroleum Exchange. The February natural gas contract jumped 32.3¢ to $3.98/Mcf on IPE.

Contact Sam Fletcher at

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP,


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected