Crude oil price volatility misleading

Sam Fletcher
Senior Writer

Waffling prices seemed unusually volatile in crude futures markets in the second quarter when actually "the exact reverse is true," said Paul Horsnell with Barclays Capital Inc., London.

Front-month contracts for benchmark US light, sweet crudes traded from a high of $75.35/bbl to a low of $65.60/bbl on the New York Mercantile Exchange, closing at $70.87/bbl on June 23. "That range of $9.75/bbl is the smallest in absolute terms for any quarter over the past 2 years," Horsnell said. "Expressed as a percentage of the average price, at 14% the trading range this quarter has been the lowest for 35 quarters, i.e., it has been the least volatile, at least on this measure, since the third quarter of 1997."

He further noted, "Prices have stayed rather neatly in the $65-75/bbl range that we believe has taken over from the previous $60-70/bbl range. There has been no particular trend; just a series of oscillations within bounds, producing what we would classify as the calmest quarter of the whole decade to date."

The average NYMEX crude futures price for April-June "looks as if it will come out just a shade above $70/bbl, beating the previous record of $63.48/bbl, set in the first quarter of 2006 by more than 10%," said Horsnell. Although one might surmise from some reports that commodity prices had collapsed during the quarter, he said, "The reality is that the quarter has seen a significant shift upwards, has laid the $60-70/bbl trading range to rest for the moment, and has created a new set of daily, weekly, monthly, and quarterly record highs."

Gasoline stocks
The Energy Information Administration said US gasoline stocks inched up by 300,000 bbl to 213.4 million bbl during the week ended June 16, primarily because of growing demand and lower imports of gasoline stocks and blends. Commercial inventories of US crude increased by 1.4 million bbl to 347.1 million bbl in the same period, the latest reported prior to deadline. Distillate fuel inventories rose by 1.7 million bbl to 124.5 million bbl (OGJ Online, June 21, 2006).

"The seasonal stock build appears to be coming to end," Horsnell said. US gasoline demand for June so far is averaging a very robust 9.429 million b/d, up from year-ago levels and "still very close" to the 9.54 million b/d record set last August, he said.

For 9 consecutive weeks, US retail gasoline prices have remained within the narrow band of $2.86-2.95/gal for the national average price of regular unleaded, Horsnell reported June 21.

However, Olivier Jakob, managing director, Petromatrix GMBH in Zug, Switzerland, said the recent change in gasoline specifications makes it "a bit more difficult" to read gasoline demand numbers reported weekly by EIA. "We have seen recently some very high imports of gasoline and blending components in the [US] Northeast. If there is any misreporting of the stock number because the importers are not sure about the classification of the blending component, the high imports and relative low stock number make for an over-estimation of the calculated demand," he said.

Jakob agreed with EIA that US gasoline demand is still increasing, albeit at a lower than normal rate. "The latest data from the US Department of Transportation would also point to a growth in travel which is only moderate," he said.

"Despite near-record-high retail gasoline prices, over the past 4 weeks, US gasoline consumption has averaged 0.9% above comparable prior-year levels, above last week's 0.6% gain," said Jacques Rousseau, senior energy analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va. "The Department of Energy projects that US gasoline prices will average $2.61/gal during the second half of 2006 and miles driven will accelerate to above the 1% growth level."

Natural gas
Ronald J. Barone, UBS Securities LLC, New York, said storage operators have begun notifying customers of injection limits because injection rates are beginning to test capacity. "El Paso's ANR Pipeline Co. and Southern Natural Gas Co., for example, recently moved to limit injections for some interruptible customers and warned that storage availability could be further curtailed," Barone said June 23. "The peaking capacity paints an interesting fundamental picture for gas prices."

EIA said 79 bcf of gas was injected into US storage in the week ended June 16, up from 77 bcf the previous week, but down from 80 bcf a year ago. US gas storage is at 2.5 tcf, 451 bcf above year-ago levels and 643 bcf above the 5-year average. Barone said an injection pace of 7.11 bcfd to reach 3.4 tcf of gas in underground storage by Nov. 1.

(Online June 26, 2006; author's e-mail: 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...

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 ...

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...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...
White Papers

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

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When 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


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

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