Supply outlook pressures prices

Sam Fletcher
Senior Writer

Energy prices fluctuated Apr. 9-13 with fast-paced changes in US inventories and political threats to Middle East crude supplies.

The May contract for benchmark US light, sweet crudes fell $2.77 to $61.51/bbl Apr. 9 on the New York Mercantile Exchange following Iran's release of 15 UK sailors and marines. It was the biggest price reduction for a front-month crude contract in 3 months. Yet an Apr. 10 rally in gasoline and heating oil boosted May crude to $61.89/bbl for its first gain in five sessions on NYMEX. The price inched up to $62.01/bbl Apr. 11 as US gasoline stocks fell for the 9th consecutive week, plunging 5.5 million bbl to a below-average level of 333.4 million bbl during the week ended Apr. 6, the lowest level since 2001. The crude price escalated to $63.85/bbl Apr. 12 on evidence that US gasoline inventories had gone from adequate to tight in less than a month. It slipped to $63.63/bbl Apr. 13, resulting in roughly a 1% loss in volatile trading that week.

"The US gasoline crack is taking back its driving position. Demand is holding well. Geopolitics moved to the back seat," said analysts at the Société Générale Group in an Apr. 16 report. Members of the Organization of Petroleum Exporting Countries won't increase supply until crude prices climb above $70/bbl, said Société Générale.

Analysts in the Houston office of Raymond James & Associates Inc. said, "It is not often that a single refinery outage has a material impact on the US oil market, but that is precisely what has happened in the wake of the fire at the Sunray, Tex., refinery. The temporary glut of crude oil at Cushing, Okla., has kept the price of West Texas Intermediate stagnant year-to-date, even as global oil prices surged higher." Valero Energy Corp.'s 158,000 b/d Sunray refinery in the Texas Panhandle is expected to restart this month. Once that happens, Raymond James analysts said, "We believe that WTI prices could rise by up to 10% within the next 6 weeks."

Raymond James analysts said refinery shutdowns have led to a build-up of crude oil in inventory depressed WTI prices compared to Brent Sea crude prices on the London Stock Exchange. "Iran remains a catalyst for high oil prices, however. The country asserts it is enriching uranium on an industrial scale in defiance of global sanctions," they said.

Refinery problems in the Midwest helped inflate the local stock build, while Canadian crude exports to the same area made market prices for WTI "incredibly weak" vs. North Sea Brent crude. The primary problem, said Société Générale was "not enough crude on the Atlantic Basin and too much in Cushing." Crude supplies in Cushing surged by 12% in the week ended Mar. 30.

Gasoline inventories
With the official the start of the summer driving season approaching on May 28, Société Générale analysts were expecting the first seasonal build of gasoline stocks after an "unrealistic" draw of 5 million bbl to 205.2 million bbl during the week ended Mar. 30. Instead, the Energy Information Administration reported Apr. 11 that US gasoline stocks fell for the ninth consecutive week, plunging 5.5 million bbl to a below-average level of 333.4 million bbl during the week ended Apr. 6, the lowest level since 2001.

Commercial US crude inventories increased by 700,000 bbl to 333.4 million bbl during the same period, well below the jump some analysts had expected in the face of recent refining outages. Distillate fuel inventories inched up just 100,000 bbl to 118.1 million bbl, with a modest gain in diesel offsetting a drop in heating oil. Propane and propylene inventories rose 700,000 bbl to 25.8 million bbl in the same week.

Imports of crude into the US fell 441,000 b/d to 9.8 million b/d during that period. However, the input of crude into US refineries increased by 231,000 b/d to 15.1 million b/d, with units operating at 88.4% of capacity. Gasoline production declined to 8.5 million b/d while distillate fuel production increased to 4.2 million b/d.

The International Energy Agency in Paris said Apr. 12 that inventories of crude and petroleum products among member countries of the Organization for Economic Cooperation and Development fell by 80 million bbl in February due to seasonal refinery maintenance in North America.

IEA estimated that members of the Organization of Petroleum Exporting Countries (excluding Iraq and Angola) reduced their total production by 200,000 b/d to 26.5 million b/d in March. That was 1.2 million b/d below September 2006 levels and contributed to declining crude stocks. EIA revised its 2007 "call-on-OPEC" down by 200,000 b/d to 31.5 million b/d.

(Online Apr. 16, 2007; author's e-mail: samf@ogjonline.com)


Related Articles

Chevron Phillips Chemical concludes Sweeny ethylene expansion

12/11/2014 Chevron Phillips Chemical Co. LP (CPCC) has completed installation of a furnace at its Sweeny petrochemical complex in Old Ocean, Tex., that will e...

BPCL adds petrochemicals to Kochi refinery expansion

12/09/2014 Bharat Petroleum Corp. Ltd. (BPCL), Mumbai, plans to diversify into petrochemicals production as part of the ongoing integrated expansion and upgra...

Sasol lets contract for Louisiana polyethylene plant

12/04/2014 Sasol Ltd. has let a contract to Toyo Engineering Korea Ltd. (TEK), a subsidiary of Toyo Engineering Corp., for work related to its proposed integr...

Williams targets December start for Geismar ethylene sales

12/02/2014 Williams Partners LP is in the final stages of commissioning and plans to begin ethylene sales from its newly expanded Geismar, La., olefins plant ...

Lotte Chemical lets contract for Malaysian cracker revamp

12/02/2014 Malaysiaian olefins producer Lotte Chemical Titan (M) Sdn. Bhd., a subsidiary of South Korea’s Lotte Chemical Corp., has let a contract to KBR Inc....

Chapman to succeed Pryor as ExxonMobil Chemical president

11/24/2014 Neil A. Chapman is expected to assume the roles of president of ExxonMobil Chemical Co. and vice-president of ExxonMobil Corp. following the retire...

Westlake Chemical lets EP contract for ethylene plant expansion

11/18/2014 Westlake Chemical Corp., Houston, has let a contract to Technip for work related to the expansion of ethylene capacity at its Sulphur, La., plant n...

Fire hits Shell-Motiva Norco manufacturing complex

11/17/2014 Damage assessment remains under way at the Shell Chemical LP-Motiva Enterprises LLC integrated refining and petrochemical complex at Norco, La., fo...

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