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

California Bay Area advances plan for enhanced refinery regulations

12/19/2014 California’s Bay Area Air Quality Management District (BAAQMD), the public agency responsible for regulating stationary sources of air pollution in...

ExxonMobil lets contract for Antwerp refinery

12/17/2014 ExxonMobil Petroleum & Chemical BVBA has let an engineering, procurement, and construction contract to Fluor Corp. for a delayed coker to be in...

BPC report examines 40 possible options to reform RFS

12/16/2014 The Bipartisan Policy Center issued a report outlining 40 possible options for reforming the federal Renewable Fuels Standard in an effort to move ...

Turkish refinery secures Canadian financing

12/16/2014 Export Development Canada (EDC) said it is participating as lead arranger in the $3.3 billion debt-financing consortium supporting STAR Rafineri AS...

Angola’s Sonangol secures $2 billion loan for refinery, other projects

12/15/2014 China Development Bank (CDB) has extended a $2 billion line of credit to state-owned Sonangol EP to support expansion projects in Angola’s oil and ...

Pertamina plans $25 billion revamp of Indonesian refineries

12/15/2014 PT Pertamina (Persoro) has entered agreements with Saudi Aramco, JX Nippon Oil & Energy Corp., and China Petroleum & Chemical Corp. (Sinope...

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

Repairs under way at ORPIC’s Muscat refinery

12/11/2014 Oman Oil Refineries & Petroleum Industries Co. (ORPIC) said it plans to resume operations at its 106,000-b/d Mina Al Fahal refinery near Muscat...

Phillips 66 advances plans for splitter at Sweeny refinery

12/11/2014 Phillips 66 has filed an application with state regulators for a permit to build a condensate splitter at its 247,000-b/d Sweeny refinery in Old Oc...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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