MARKET WATCH
Gasoline supply worries raise energy prices

Sam Fletcher
Senior Writer

HOUSTON, May 18 -- Energy prices escalated May 17 as unexpected shut-ins of US refining capacity "sent shock waves through the markets," analysts said.

The front-month contract for benchmark US crudes topped $65/bbl in intraday training in the New York market because of "a continuous string of refinery snags, with Murphy Oil, ConocoPhillips, and BP PLC being the latest to shutdown units due to lagging maintenance issues," said analysts in the Houston office of Raymond James & Associates Inc. "Above-average weekly gasoline inventory draws this year have left traders skittish regarding gasoline supplies, now 7% below the 5-year average, as we quickly approach this summer's driving season."

Rising crude prices also pulled natural gas futures above $8/MMbtu in New York. "Even with the recent near-term volatility, oil prices have remained above $60/bbl for almost 2 months. We continue to believe that rising global demand, coupled with minimal excess production capacity from the Organization of Petroleum Exporting Countries and increasing visibility of geopolitical risks, are likely to drive oil prices even higher as 2007 progresses," Raymond James analysts reported. "Furthermore, the [North Sea] Brent crude oil contract—still viewed by many as the more-accurate benchmark [than the US crudes]—rallied above $70/bbl and now represents a $5/bbl premium to [top US crudes]."

Raymond James analysts said: "LNG imports to the US continue to come in at elevated levels as a result of the remaining supply overhangs in Asia and Europe. However, we believe that increased gas demand fueled by a rising price incentive to burn natural gas over crude derivatives, combined with increased liquid stripping and declining imports from Canada should help offset the increase in LNG imports during this injection season. Of note, the natural gas 12-month strip has reached $9/Mcf for the first time in over 8 months; and as such, gas producers can now hedge winter 2007-08 volumes at an appetizing price of over $10/Mcf."

Analysts at Enerfax Daily said Canadian gas supplies to the US in June may be 600 MMcfd below last year's levels. "Companies cut their drilling budgets last year as prices dipped and well costs soared," they said.

Energy prices
The June contract for benchmark US light, sweet crudes traded as high as $65.09/bbl before closing at $64.86/bbl, up by $2.31 for the day on the New York Mercantile Exchange. The July contract gained $1.97 to $65.92/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $2.31 to $64.87/bbl. Heating oil for June delivery escalated by 6.97¢ to $1.94/gal on NYMEX. The June contract for reformulated blend stock for oxygenate blending (RBOB) jumped by 9.96¢ to $2.44/gal.

The June natural gas contract traded as high as $8.14/MMbtu in the NYMEX session before closing at $8.08/MMbtu, up 18.5¢ for the day. On the US spot market, gas at Henry Hub, La., gained 10¢ to $7.71/MMbtu.

After the US Energy Information Association reported an injection into US gas storage that was at the low end of expectations among Wall Street analysts, gas futures prices rose "on fund buying," said analysts at Enerfax Daily. "Speculative traders have been trying to push the market above $8[/MMbtu] but have found higher prices difficult to sustain amid mild weather. The increase in storage should ultimately place incremental downward pressure on futures. The funds want to escape from the trading range so technicals would kick in to help force prices higher. Hedge funds, who had been betting that the price of June natural gas futures would fall, have been buying back long positions ahead of warmer weather."

In London, the new front-month July IPE contract for North Sea Brent crude jumped by $2.30 to $70.27/bbl. Gas oil for June increased by $10.50 to $599/tonne.

The average price for OPEC's basket of 11 benchmark crudes increased by 72¢ to $65.14/bbl on May 16.

Contact Sam Fletcher at 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...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

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 ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

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...
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