MARKET WATCH: Crude prices fall, wiping out gains

Sam Fletcher
Senior Writer

HOUSTON, July 30 -- Crude and petroleum product futures prices fell July 29, wiping out all gains from the previous session, after the Department of Transportation reported a 3.7% decline in the total number of miles traveled in the US by motorists during May vs. the same month in 2007 when mileage was down 1.8%.

Total US mileage driven in January-May was down 2.4%, compared with a 2.1% drop during the same period last year. Moreover, said analysts in the Houston office of Raymond James & Associates Inc., "The dollar continues to strengthen, as oil (and other commodity) prices keep tumbling; in fact, the dollar hit a 1-month high yesterday." Oil prices were down in premarket trading July 30 in expectation of a build in petroleum inventories. "Natural gas continued to trade downward premarket," Raymond James analysts said. "We reiterate our stance that natural gas prices could continue to fall over the next few months as the year-over-year storage deficit shrinks."

At Pritchard Capital Partners LLC, New Orleans, analysts said, "Crude prices have fallen more than $25/bbl over the past 2 weeks as oil investors worried that high prices for fuel made from crude oil have seriously damaged demand. Average [retail] prices for regular gasoline in the US fell for the 13th straight day…but remained near $4/gal, more than 35% higher than they were a year ago."

US inventories
The Energy Information Administration reported July 30 that commercial US crude inventories slipped 100,000 bbl to 295.2 million bbl during the week ended July 25, far short of the expected 1.2 million bbl drop that was the consensus of Wall Street analysts. Gasoline stocks fell 3.5 million bbl to 213.6 million bbl in the same period vs. an expected increase of 100,000 bbl. Distillate fuel inventories increased by 2.4 million bbl to 130.5 million bbl, exceeding the consensus for a 1.9 million bbl build. Propane and propylene inventories increased by 500,000 bbl to 45.8 million bbl.

Imports of crude into the US increased by 199,000 b/d to 10 million b/d in the same week. Input of crude into US refineries gained 50,000 b/d to 15.2 million b/d with units operating at 87.2% of capacity. Gasoline production fell to 9 million b/d, but distillate fuel production increased to 4.7 million b/d.

Energy prices
The September contract for benchmark US light, sweet crudes dropped $2.54 to $122.19/bbl July 29 on the New York Mercantile Exchange. The October contract lost $2.55 to $122.74/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $2.55 to $122.19/bbl. Heating oil for August delivery fell 8.98¢ to $3.47/gal on NYMEX. The August contract for reformulated blend stock for oxygenate blending (RBOB) declined 6.23¢ to $3.01/gal.

The August natural gas contract continued to climb, up 5.4¢ to $9.22/MMbtu on NYMEX. Pritchard Capital analysts said, "Despite revisiting sub-$9 prices for the third time over the last four sessions, expiring August natural gas futures tiptoed out the back door instead of making a grand exit." On the US spot market, gas at Henry Hub, La., lost 10¢ to $9.16/MMbtu.

In London, the September IPE contract for North Sea Brent crude dropped $3.13 to $122.71/bbl. Gas oil for August fell $23.75 to $1,138.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes was down $1.46 to $121.73/bbl July 29.

Contact Sam Fletcher at samf@ogjonline.com.

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