MARKET WATCH
Growing US stocks of petroleum products depress oil prices

Sam Fletcher
Senior Writer

HOUSTON, Oct. 23 -- Futures prices for crude and petroleum products continued to fall Wednesday, following government and industry reports of builds in US inventories of gasoline and distillates.

The American Petroleum Institute said late Wednesday that US gasoline stocks jumped by more than 3 million bbl to 198.4 million bbl during the week ended Oct. 17, while distillates were up by 2.7 million bbl to 128.4 million bbl. However, it said, US oil inventories fell by 1.9 million bbl to 295.3 million bbl during the same period.

The US Energy Information Administration earlier reported a 1.4 million bbl increase in US gasoline inventories to 196 million bbl during that period. US distillate stocks were up by 2.6 million bbl to 132.4 million bbl, with increases in both diesel and heating oil, it said, while US oil stocks fell by 1.8 million bbl to 288.2 million bbl.

Strange data
EIA's latest report of US inventories is "a strange set of data, which run against several recent trends," said Paul Horsnell, head of energy research at Barclays Capital Research, a division of Barclays Bank PLC, London. "While the recent pattern has been for crude oil tightness to lessen while oil product tightness remained fairly firm, this week the data moved the other way."

Previously, said Horsnell, "A trend of fairly sharply rising oil inventories had been generally taken for granted, but now there is some reason to question it. Crude imports are falling, with the 4-week average [of 9.7 million b/d] moving down to its lowest level since mid-July. At the same time, refinery runs of crude oil are on the increase."

EIA reported crude input into US refineries averaged 15.3 million b/d last week, up 237,000 b/d from the previous week. "This is the second week in a row in which crude oil refinery inputs have increased, which may signal that refineries are beginning to return from their fall maintenance," said EIA officials.

They also reported US oil imports averaged 9.5 million b/d last week, down by 506,000 b/d from the previous week. "It appears that crude oil imports from Venezuela dropped significantly last week," EIA said.

Horsnell concluded "that any idea of rapidly rising crude inventories has to be abandoned or at least that the 2001 peaks of above 320 million bbl look too far away to be achievable particularly quickly. It does also look as if the pressure on the supply chain is a constricting one and that the trend for refinery utilization is upward.

"Put all that together, and the end of the rising crude oil inventory trend is certainly coming closer, even if [these latest data] prove not to be the exact turning point," he said.

EIA's figures for US distillate stocks "look a bit more like an anomaly," Horsnell said. "This is too large a movement to be consistent." He noted that "in the key area for heating oil demand, the Central Atlantic states, the situation was little changed, leaving inventories a little tighter than normal and still less than one would want unless the winter was likely to be a mild one."

In a separate report Wednesday, API said the average US retail price for regular gasoline increased by 0.3¢ last week to $1.571/gal as of Oct. 20, up by 11.3¢ from the same period last year. The average US retail price for all types of gasoline inched up by 0.1¢ to $1.612/gal last week.

"This is the first time in 8 weeks that gasoline prices did not fall," API said.

EIA said the average US retail price for diesel increased for the third week in a row, up by 1.9¢ to $1.502/gal, an increase of 3.3¢/gal from year-ago levels.

Futures markets mixed
However, unleaded gasoline for November delivery plunged by 2.75¢ to 82.13¢/gal Wednesday on the New York Mercantile Exchange, while heating oil for the same month lost 0.99¢ to 81.6¢/gal.

The new front-month December contract for benchmark US sweet, light crudes declined by 40¢ to $29.92/bbl Wednesday on NYMEX, as the January position retreated by 33¢ to $29.62/bbl. On the cash spot market, West Texas Intermediate at Cushing, Okla., lost 45¢ to $29.73/bbl.

Oil markets last week gave up about a third of the price gained since Sept. 24 when members of the Organization of Petroleum Exporting Countries announced they would reduce production quotas by 900,000 b/d to 24.5 million b/d, effective Nov. 1, Horsnell said. Despite recent price volatility, he said, "For the moment at least, we now suspect the market is a bit stuck. Until some new dynamic arises, we can see no fundamental basis for WTI prices being able to sustain a rise above $31/bbl or a fall below $28/bbl."

Meanwhile, the November natural gas contract rose by 4.9¢ to $4.92/Mcf Wednesday on NYMEX, "driven by a rallying cash market despite some technical selling, weaker crude [prices], and expectations of another big storage build," said analysts Thursday at Enerfax Daily. "The temperature change in the Midwest and Northeast for the next day or so is pretty significant, which is what drove cash [prices] higher, but there doesn't seem to be much follow-through cold weather, so don't expect the rally to carry far," they warned.

EIA early Thursday reported 84 bcf of natural gas were injected into US underground storage last week, up from 81 bcf the previous week and 33 bcf during the same period a year ago. The latest injection figure was above the consensus of Wall Street analysts and pushed US gas storage past 3 tcf into the "comfort zone" for anticipated winter demand. US gas storage is still down by 133 bcf from year-ago levels and 25 bcf below the 5-year average for this period, however.

In London, the December contract for North Sea Brent oil lost 35¢ to $28.28/bbl Wednesday on the International Petroleum Exchange. The November natural gas contract lost 2.6¢ to the equivalent of $4.60/Mcf on IPE, but oil gas for the same month increased by $1.50 to $258.50/tonne on IPE.

"Natural gas prices on UK and US exchanges moved in dramatically different ways last week," noted Horsnell. "UK natural gas futures prices outperformed all other commodities contracts in rising by 7.7% [to their highest level this year], while US natural gas futures showed the weakest performance across commodities in falling by 11%."

The average price for OPEC's basket of seven benchmark crudes lost 24¢ to $28.16/bbl Wednesday, marking the 10th consecutive trade day that price has exceeded the group's target band of $22-28/bbl.

However, Horsnell said, "We would not expect the continued robustness of prices to lead to any additional [oil] supply from OPEC members, even if prices were to extend their run above the target band."

Contact Sam Fletcher at samf@ogjonline.com

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

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

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by
Available Webcasts


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.

register:WEBCAST



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

register:WEBCAST


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, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


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