MARKET WATCH
SPR plan drives up crude futures price

Sam Fletcher
Senior Writer

HOUSTON, Jan. 24 -- For the first time in 2 weeks, the front-month crude futures contract closed above $55/bbl Jan. 23 on the New York market shortly after Sec. of Energy Samuel W. Bodman announced plans to double the amount of oil in the US Strategic Petroleum Reserve to 1.5 billion bbl by 2027.

Official confirmation of that plan came later in the evening in President George W. Bush's state of the union speech to Congress. Bodman promised the additional crude would be acquired by the government at a rate of 100,000 b/d "in a manner that does not adversely affect the market or raise gasoline prices." DOE already planned an 11 million bbl replacement of previously drawn SPR stocks, officials reported.

Established in 1975 following an embargo on oil shipments to the US from the predominately Muslim members of the Organization of Petroleum Exporting Countries, SPR consists of government-owned oil stored in salt caverns primarily along the Gulf Coast for use in case of severe supply disruptions. It now holds 691 million bbl of crude, equivalent to 55 days of net US imports. Increasing it to 1.5 billion bbl would provide 97 days of supply protection and would require expansion of current SPR facilities.

"SPR has not been buying oil since the hurricanes in the fall of 2005, so these purchases would be a boost to oil demand (though small relative to total US oil demand of about 20 million b/d)," said analysts at the Houston office of Raymond James & Associates Inc.

Half of the Jan. 23 crude price gain came in the last 30 min of trade on the New York Mercantile Exchange when the DOE plan was announced. But the market momentum was already "shifting from downwards to upwards" in earlier trading during that session, as forecasts of colder weather lifted natural gas futures price to the highest level in 6 weeks, and pulled up prices for crude and petroleum products, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

Also contributing to higher energy prices were escalating tensions over Iran's continued nuclear activities, continued violence in Nigeria, a weakening dollar, and expectations of the first decline in distillate supplies in 6 weeks.

"By making an increase in oil reserves a foreign policy strategy, it is more likely than not that it will also push other aspiring superpowers (China and India) to increase their plans for strategic reserves, creating additional long term demand," Jakob said. "Shorter term it gives an excuse to OPEC to shy away from action on a flat price increase as the blame can be put on the strategic refill. OPEC's role is to ensure a stable price to the consumer but not necessarily to the building of strategic stocks that could potentially be used to cushion future action against them."

US inventories
Meanwhile, the US Energy Information Administration said Jan. 24 that commercial US crude inventories (excluding SPR) increased for the second time in 10 weeks, up by 700,000 bbl to 322.2 million bbl during the week ended Jan. 19, following a 6.8 million bbl jump the prior week.

Gasoline stocks rose by 4 million bbl to 220.8 million bbl last week. Although expected to fall, distillate fuels gained 700,000 bbl to 142.6 million bbl, with a decrease in heating oil offset by an increase in diesel fuel.

Imports of crude into the US declined by 1.2 million b/d to 9.8 million b/d during the same period. Input of crude into US refineries fell by 205,000 b/d to 14.9 million b/d with units operating at 87.4% of capacity. Gasoline production was relatively flat at 9.1 million b/d while distillate fuel production decreased to 3.9 million b/d.

Energy prices
The new front-month March contract for benchmark US light, sweet crudes closed at $55.04/bbl, up by $2.46 for the day, after trading at $52.41-55.15/bbl on NYMEX. The April contract gained $2.38 to $55.91/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $2.76 to $53.90/bbl. Heating oil for February delivery increased by 6.79¢ to $1.58/gal on NYMEX. The February contract for reformulated blend stock for oxygenate blending (RBOB) climbed by 7.19¢ to $1.45/gal.

The February natural gas contract gained 27.8¢ to $7.60/MMbtu on NYMEX, having traded as high as $7.66/MMbtu during that session. On the US spot market, gas at Henry Hub, La., was up 21¢ to $7.38/MMbtu.

In London, the March IPE contract for North Sea Brent crude increased by $2.40 to $55.10/bbl. But gas oil for February lost $5.50 to $485/tonne.

The average price for OPEC's basket of 11 benchmark crudes slipped by 11¢ to $49.52/bbl on Jan. 23.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Delaware City refinery, Praxair ink deal for carbon dioxide recovery plant

07/17/2015 Delaware City Refining Co. LLC (DCR), a subsidiary of PBF Energy Inc., Parsippany, NJ, has entered a long-term agreement with Praxair Inc. to suppl...

TGP advances Northeast Energy Direct gas line to New England

07/17/2015 Tennessee Gas Pipeline Co. (TGP), a subsidiary of Kinder Morgan Inc. (KMI), Houston, has been cleared by KMI’s board to proceed with plans to build...

Aussie, Timor-Leste regulators terminate Timor Gap permit

07/17/2015 Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian com...

Nexen pipeline leaks 5,000 cu m of emulsion in Alberta

07/17/2015 Alberta Energy Regulator (AER) reported that a Nexen Energy ULC pipeline has leaked 5,000 cu m of emulsion—a mixture of bitumen, produced water, an...

MARKET WATCH: NYMEX crude oil prices drops below $51/bbl

07/17/2015 Light, sweet crude oil prices for August delivery dropped modestly to settle at just under $51/bbl on the New York July 16, but Brent crude oil Aug...

API: US petroleum demand rose in June, second quarter

07/16/2015 Total US petroleum deliveries, a measure of demand, increased 4.2% from June 2014 to average 19.6 million b/d last month. In the second quarter, de...

ConocoPhillips plans further capex reduction for deepwater exploration

07/16/2015 ConocoPhillips reported plans to further reduce its capital expenditures for deepwater exploration, with the “most significant reductions” coming f...

DOE official: LNG exports could be limited by silt-clogged waterways, ports

07/16/2015 Silt, which is increasingly filling US waterways and ports, potentially could limit US LNG exports if it is not dredged soon, a top US Department o...

Fitch notes increase in energy-default rate

07/16/2015 Recent actions of two exploration and production companies have pushed the trailing 12-month energy default rate among issuers of high-yield bonds ...
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


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