MARKET WATCH: Energy prices, demand continue to fall

Sam Fletcher
Senior Writer

HOUSTON, Aug. 13 -- Crude prices continued to tumble Aug. 12 as the US dollar strengthened amid reports of declining demand for energy.

"The Dollar Index has regained its role of a market maker in crude oil, and we could notice throughout the day some nervousness on crude oil depending on the gyration of the dollar," said Olivier Jakob at Petromatrix, Zug, Switzerland.

"Virtually everything traded slightly lower [Aug. 12] (oil, gas, energy stocks, broader market), as bearish momentum remains," said analysts in the Houston office of Raymond James & Associates Inc. "Crude prices have fallen 5% over the past few days, in spite of fighting between Georgia and Russia. Iranian officials reported that its crude stored in floating storage tanks over the past few months has now been sold, pointing to increased demand from refineries."

In New Orleans on Aug. 13, however, analysts at Pritchard Capital Partners LLC said, "Indications of a weaker dollar puffed strength back into oil futures after yesterday's losses. Prevailing winds surrounding the market have pointed to weaker prices. Fuel consumption continues to look weaker, echoing sentiments of 'demand destruction' from sources in the retail sector. US gasoline consumption slid 2% last week compared to the week before, according to the MasterCard Spending Pulse report, the first weekly decrease since the Saturday-Friday period ended July 2. Demand remains at a deficit to last year's levels at this time as well." They added, "Some analysis noted that the market has fallen far very quickly, and some might consider it oversold and look for bargains on the bid side."

Meanwhile, in its monthly report issued Aug. 12, the Energy Information Administration said US crude prices are expected to average $119/bbl this year, down from its $124/bbl forecast in July. It reduced its outlook for 2009 to $124/bbl, down from $133/bbl previously. It forecast annual average gasoline prices of $3.65/gal for 2008 and $3.82/gal for 2009. EIA's previous estimate was more than $4/gal for both years. In reducing its estimates, EIA cited slower demand growth and increased production capacity.

In its monthly Traffic Volume Trends published Aug. 13, the US Department of Transportation reported a 4.7% decline in miles driven on US streets and roadways in June from year-ago levels. Traffic volume was down 2.8% in January-June, vs. the same period in 2007. That's on top of declines of 3.7% and 2.4%, respectively, in the previous month's report.

As a precaution because of the fighting in Georgia, operator BP PLC said it closed the Baku-Tbilisi-Ceyhan pipeline that transports oil from the Azeri-Chirag Gunashli oil fields to Turkey (OGJ Online, Aug. 12, 2008). However, officials said oil is still being transported by train to the Georgian port of Batumi on the Black Sea and via an Azeri-operated pipeline.

US inventories
EIA reported commercial inventories of US crudes dipped by 400,000 bbl to 296.5 million bbl during the week ended Aug. 8. Analysts were expecting no major change in that stockpile. Gasoline stocks fell 6.4 million bbl to 202.8 million bbl in the same period, vs. a Wall Street consensus of a 1.9 million bbl decline. Distillate fuel inventories decreased 1.7 million bbl to 131.6 million bbl, vs. an expected increase to 1.9 million bbl. Propane and propylene inventories increased by 2 million bbl to 49.2 million bbl.

Imports of crude into the US dropped by 538,000 b/d to 9.7 million b/d in that same week. The input of crude into US refineries was down 216,000 b/d to 14.8 million b/d with plants operating at 85.9% of capacity. Gasoline production fell to 8.9 million b/d, while distillate fuel production decreased to 4.3 million b/d.

Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, observed, "A combination of lower production, fewer imports, and seasonally rising demand led to a 8.7 million bbl decline (2.3%) to light product inventories (gasoline plus distillate plus jet fuel). However, given that demand growth remains very weak and refiners are operating well below capacity, we do not view this as the start of a positive trend. Our belief is that when refining margins rise, refiners will increase production and imports will rise, limiting any earnings gains for the refiners. A sustained improvement in the sector is unlikely to occur, in our view, until lower retail prices improve demand."

Energy prices
The September contract for benchmark US light, sweet crudes traded at $112.31-115.95/bbl Aug. 12 prior to closing at $113.01/bbl, down $1.44 for the day on the New York Mercantile Exchange. The October contract lost $1.53 to $113.13/bbl. Heating oil for September dropped 4.14¢ to $3.08/gal. The September contract for reformulated blend stock for oxygenate blending (RBOB) declined 2.34¢ to $2.84/gal.

The September natural gas contract lost 1.9¢ to $8.33/ MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.5¢ to $8.19/MMbtu. Pritchard Capital analysts said, "After September natural gas futures gained barely more than a dime on [Aug. 4], bullish traders were unable to produce any follow-through momentum on [Aug. 5]." They said, "A number of market participants are targeting the $8.20/MMbtu price level as a crucial pivot point. One factor that could hinder further price cuts is storm formation in the tropics." Weather forecasters are watching two potential formations in the Atlantic basin that could develop into tropical systems.

In London, the September IPE contract for North Sea Brent crude lost $1.52 to $111.15/bbl. Gas oil for August was unchanged at $1,018.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes fell by $2.19 to $109.08/bbl on Aug. 12.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Vietnam, Japan sign MOU for grassroots Vietnamese refinery

12/23/2014 State-run Vietnam National Petroleum Corp. (Petrolimex) and JX Nippon Oil & Energy Corp., a subsidiary of JX Holdings Inc., have signed a memor...

Sasol secures financing for Louisiana petrochemical complex

12/23/2014 Sasol Ltd. has completed a $4 billion credit facility for its proposed integrated ethane cracker and downstream derivatives complex to built adjace...

Moody's: Russian oil-tax change helps exporters

12/22/2014 A new adjustment to Russian oil and gas taxation will benefit oil companies that export most of their crude oil and high-grade oil products but hur...

IOC wraps study for petrochemical plant at Paradip

12/18/2014 Indian Oil Corp. Ltd. (IOC) has completed a detailed feasibility study for setting up a polypropylene (PP) plant as part of a proposed petrochemica...

Patel appointed as LyondellBasell’s chief executive officer

12/18/2014 LyondellBasell has chosen Bhavesh V. Patel to serve as its chief executive officer effective Jan. 12, 2015. He succeeds James L. Gallogly, who...

Construction under way for Texas ethane cracker

12/17/2014 Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has started construction on...

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...

White Papers

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

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

Available Webcasts



The Future of US Refining

When 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

When 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



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


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