MARKET WATCH: Oil prices rise in New York market

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 22 -- Oil prices rose in volatile trading Apr. 23, pulled up by the expiration of the May crude contract and a general strengthening of the US equity market.

In New Orleans, analysts at Pritchard Capital Partners LLC noted a strong increase for energy corporate stock prices despite recent reports of poor first-quarter financial results by some of the largest oil field service companies. "We have frequently cited this type of market action as an important indicator—when stocks stop going down on bad news—which appears to be occurring here," Pritchard Capital analysts said.

"Historical patterns suggest that oil service stocks rally months in advance of a turn in business fundamentals," they said. "This action causes confusion among investors as it usually occurs while fundamentals are still deteriorating (like now) and commodity prices (natural gas) have yet to bottom." Some industry observers expect the decline in North American activity to trough during the second quarter, "which is very positive (but skepticism abounds); one thing is clear, the energy market is now at a point where estimate cuts no longer make stocks go down."

Meanwhile, the US Highway Administration reported total vehicle miles traveled in the US during February "were nominally down 'only' 0.9% from a year ago, which is a significant improvement from the driving destruction seen during 2008," said Olivier Jakob at Petromatrix, Zug, Switzerland. That data confirms the bottoming of demand destruction in the Department of Energy's gasoline numbers, Jakob said. "Industrial demand is not back yet and unemployment is still very high, but the US driver seems to be reacting to the lower prices at the pump," he said.

US inventories
The Energy Information Administration said Apr. 22 commercial US crude inventories continued to climb in the week ended Apr. 17, up 3.9 million bbl to 370.6 million bbl, exceeding Wall Street's consensus of 2.5 million bbl. Gasoline inventories increased 800,000 bbl to 217.3 bbl in the same week, compared with an anticipated draw of 700,000 bbl. Distillate fuel inventories advanced by 2.7 million bbl to 142.3 bbl; analysts had expected a 1 million bbl draw.

Imports of crude into the US increased 464,000 b/d to 9.9 million b/d in that same period. Over 4 weeks through Apr. 17, EIA reported, US imports of crude averaged 9.5 million b/d, down 234,000 b/d from the same period in 2008.

The input of crude into US refineries climbed by 529,000 b/d to 14.5 million b/d, with units operating at 83.4% of capacity. Gasoline production increased to 9.1 million b/d while distillate fuel production increased to 4.1 million b/d.

Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, reported EIA regional data showed rising refinery utilization rates in every region. "Inventories of gasoline and distillate remain high on the Gulf Coast, Midwest, and East Coast," he said.

Refined product inventories (gasoline plus distillate plus jet fuel) increased 3.9 million bbl (1%) last week due primarily to higher production. "The most interesting data point from the EIA report, in our view, was the very weak distillate demand (3.45 million b/d), the lowest weekly total since January 2004. On a positive note, comparisons to year-ago gasoline demand should become much stronger starting at the end of May due to weak 2008 data last spring and summer," Rousseau said.

Energy prices
The expiring May contract for benchmark US light, sweet crudes traded at $43.83-47.20/bbl in the Apr. 21 session on the New York Mercantile Exchange, before closing at $46.51/bbl, a gain of 63¢. On the US spot market, West Texas Intermediate at Cushing, Okla., registered an equal gain to an equal price. The new front-month June contract was up 4¢ to $48.55/bbl on NYMEX. Heating oil for May delivery increased 1.62¢ to $1.35/gal. The May contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.25¢ but its closing price remained essentially the same at an average $1.41/gal.

Natural gas for the same month lost 2.9¢ to $3.51/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 5.5¢ to $3.47/MMbtu.

In London, the June IPE contract for North Sea Brent crude was down 4¢ to $49.82/bbl. Gas oil for May lost $2 to $429/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes dropped $1.10 to $48.49/bbl on Apr. 21.

Contact Sam Fletcher at samf@ogjonline.com.

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