Sam Fletcher
Senior Writer
HOUSTON, May 25 -- The near-month natural gas contract fell to a 3-month low May 24 on the New York futures market while prices for crude and petroleum products moved higher on speculative buying ahead of the latest government report on US inventories.
On May 25, the Energy Information Administration said commercial US crude inventories fell by 1.6 million bbl to 332.4 million bbl during the week ended May 20. "This is only the second decline in the last 15 weeks," said EIA officials.
However, in the "key East Coast, Midwest, and Gulf Coast regions," US crude inventories fell by a cumulative 4.1 million bbl during that period "after 18 straight rises," said Paul Horsnell, Barclays Capital Inc., London, in a separate May 25 report. "We expect to see further draws in current weeks, with the base for a significant push up in crude prices continuing to form," he said.
EIA reported US gasoline inventories increased by 600,000 bbl to 215.4 million bbl in the week ended May 20, while distillate fuel stocks jumped by 1.9 million bbl to 105.7 million bbl, with most of that increase in heating oil.
US imports of crude fell by 548,000 b/d to 10.3 million b/d in that same period. Input of crude into US refineries increased by 319,000 b/d to more than 15.8 million b/d during the same time, with refineries operating at 94.6% of capacity.
"The other key feature of the US weekly [inventory data] is the strength of US demand despite the recent rash of demand pessimism," Horsnell said. "With Memorial Day [May 30 US holiday marking the official start of the summer driving season] approaching and record levels of US car travel expected, gasoline is looking strong. For May-to-date, gasoline demand is up [from a year ago] by a healthy 1.4% and has shown none of the degradation in growth that occurred through second quarter last year."
He added, "Jet fuel demand is up [from a year ago] by 4.1%, and distillate demand is up by 4.6%."
Energy prices
The July contract for benchmark US light, sweet crudes jumped by 51¢ to $49.67/bbl May 24 on the New York Mercantile Exchange, while the August contract gained 42¢ to $50.47/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 76¢ to $49.38/bbl. Gasoline for June delivery escalated by 2.82¢ to $1.43/gal on NYMEX. Heating oil for the same month increased by 2.06¢ to $1.39/gal.
The June natural gas contract closed at $6.35/MMbtu, down by 5.8¢ for the day after trading at $6.31-6.47/MMbtu during that session. "The reality of huge [US natural gas] storage levels weighed on the market," said analysts at Enerfax Daily. "Despite the warm forecast for Texas and the Southwest over the next week, temperatures in the Northeast and Midwest are expected to remain near seasonal or slightly below, with highs mostly in the 60s," they said.
In London, the July contract for North Sea Brent crude increased by 45¢ to $48.82/bbl on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 20¢ to $45.70/bbl on May 24.
Contact Sam Fletcher at [email protected]
