Energy prices seesaw in early March

Sam Fletcher
Senior Writer

Energy prices dipped in profit taking Mar. 2, ending a stretch of consecutive gains over the seven previous trading sessions that pushed the April contract for benchmark US light, sweet crudes to a closing of $62/bbl Mar. 1 on the New York Mercantile Exchange.

Such a long stretch of consecutive gains previously had not occurred "since last year early in the summer," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Although market fundamentals remained strong with rising demand for gasoline and continued geopolitical concerns about Iran's nuclear program, a slide in Asian and European equity markets triggered a steeper drop in crude prices Mar. 5 to a near 2-week low of $60.07/bbl. Coming on the heels of the Mar. 1 fall in equity prices on the Shanghai Composite Exchange, the later market losses increased fears of a global economic weakness that could adversely affect oil demand.

However, energy prices rebounded Mar. 6, regaining some of the losses over the two prior sessions, as global stock markets partially recovered from their weeklong declines. The April crude contract climbed to $62.10/bbl in intraday trading Mar. 7 before closing at $61.82/bbl, up $1.13 for the day, following reports of unexpected large drops in US crude and gasoline inventories.

Energy inventories
Gasoline inventories fell by 3.75 million bbl to 216.4 million bbl in the week ended Mar. 2, vs. industry expectations of a 1.5 million bbl draw. Crude stocks dropped 4.85 million bbl to 324.2 million bbl vs. an anticipated build of 1.8 million bbl. The Energy Information Administration said commercial US distillate fuel inventories declined by 1.3 million bbl to 123.2 million bbl, with a drop in heating oil more than compensating an increase in diesel. Propane and propylene inventories dropped by 3.2 million bbl to 28.7 million bbl (OGJ Online, Mar. 7, 2007).

Imports of crude into the US fell by 650,000 b/d to less than 8.9 million b/d during that period, due in part to fog delays along the Houston Ship Channel. Yet the input of crude into US refineries increased by 141,000 b/d to nearly 14.8 million b/d, with units operating at 85.8% of capacity. Gasoline production declined slightly to 8.6 million b/d, while distillate production increased above 4 million b/d.

"Total inventories, adjusted for demand, are below the 3-year average. In total, refined product inventories declined by 5.4 million bbl last week and are now at 25.2 days of forward demand cover, below the 3-year average of 25.9 days," said Jacques Rousseau, senior energy analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va.

The fall of crude inventories was counter-seasonal and primarily the result of a 540,000 b/d decline in imports along the Gulf Coast, due to weather-related delays in lightering operations in the Houston Ship Channel. "But there is also a genuine compression of imports in progress. On a 4-week average, US crude oil imports are now down to what is a 2-year low outside of hurricane�affected weeks [in 2005]," said Paul Horsnell at Barclays Capital Inc., London. "Much of the latest draw in crude might work its way back into the data, [although] inventories have never recovered even close to their levels before the Houston Ship Channel delays of December," he said.

"The larger-than-expected draw in gasoline inventories, with motor gasoline demand above 5-year highs, stoked investor concerns surrounding supplies as we approach the summer driving season," said analysts in the Houston office of Raymond James & Associates.

"The latest US weekly data have now shown product inventories falling by 5 million bbl or more relative to their 5-year average for 3 straight weeks. Initial figures for the whole of February show demand growing at the fastest rate for more than 10 years," Horsnell said. "The overall level of inventories has over the past 4 weeks now drawn by 28.2 million bbl faster than the normal seasonal pattern, (i.e., at a rate of 1 million b/d). This has taken the total of US commercial inventories down to its lowest level since May 2005."

EIA subsequently reported the withdrawal of 102 bcf of natural gas from US underground storage in the week ended Mar. 2. That was within the consensus of Wall Street analysts and compared with withdrawals of 132 bcf the previous week and 85 bcf during the same period a year ago. It reduced US gas storage to 1.6 tcf, down by 268 bcf from year-ago levels but 194 bcf above the 5-year average. However, Raymond James analysts expect gas storage to end the winter season at 1.3-1.4 tcf despite moderate temperatures.

(Online Mar. 12, 2007; author's e-mail: samf@ogjonline.com)

Related Articles

MARKET WATCH: NYMEX crude oil price jumps more than $2/bbl

02/13/2015 Crude oil prices on the New York market jumped by more than $2/bbl Feb. 12 to settle above $51/bbl, which analysts attributed to more oil and gas c...

Apache’s 2015 capital budget less than half of last year’s $8.5 billion

02/12/2015 Apache Corp., Houston, plans a capital budget of $3.6-4 billion in 2015, with $2.1-2.3 billion directed toward onshore North America and $1.5-1.7 b...

Total reduces budget by 10% to $23-24 billion

02/12/2015 Total SA plans to lower its organic investments to $23-24 billion in 2015 from $26.4 billion in 2014 by reducing spending in brownfield development...

MARKET WATCH: NYMEX crude prices drop back below $50/bbl

02/12/2015 The New York Mercantile Exchange March crude oil contract dropped $1.18 on Feb. 11, closing at $48.84/bbl. The April contract dropped $1.15 to $50....

US House vote sends Keystone XL approval bill to Obama’s desk

02/12/2015 The US House of Representatives voted by 270 to 152 to pass S. 1, which would deem the proposed Keystone XL crude oil pipeline approved more than 6...

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

PACE survey finds 69% support for crude exports to trading partners

02/11/2015 More than two thirds of registered voters responding in a nationwide telephone survey commissioned by Producers for American Crude Exports (PACE) s...

EIA: US gasoline prices to average $1/gal less in 2015 vs. 2014

02/10/2015 US regular gasoline retail prices are expected to average $2.33/gal in 2015, down from $3.36/gal in 2014, according to the Energy Information Admin...

White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

Available Webcasts



Global LNG: Adjusting to New Realties

When Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

When Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST



On Demand

The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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