MARKET WATCH: Crude rallies, gas price falls

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 19 -- Crude prices increased for the third consecutive session Nov. 18 on the New York Mercantile Exchange, buoyed by a weak dollar and unexpected declines in US oil inventories, but still wasn’t able to crack through its apparent ceiling of $80/bbl.

Each time rising crude prices have encountered market resistance in the past month, the commodity has stalled below $80/bbl. “Without a significant catalyst to break out, look for crude to continue to trade in the $75 to $80 range,” said analysts at Pritchard Capital Partners LLC in New Orleans.

Meanwhile, the front-month natural gas contract suffered the largest single-day price drop since Oct. 1 due to forecasts of continued mild weather through the first week of December, Pritchard Capital Partners said.

The Energy Information Administration reported Nov. 19 the injection of 20 bcf of natural gas into US underground storage in the week ended Nov. 13. That boosted the amount of working gas in storage to 3.833 tcf, up 347 bcf from the same period a year ago and 419 bcf above the 5-year average. Prior to that report, Pritchard Capital analysts predicted that, with an injection larger than 19 bcf, natural gas futures prices could continue to fall “and test support at $4.”

They said, “While inventories traditionally begin to decline by the end of November, inventories are likely to continue to rise through November and come close to capacity at 3.9 tcf.”

EIA earlier reported commercial US crude inventories declined 900,000 bbl to 336.8 million bbl in the week ended Nov. 13. Gasoline stocks dropped 1.7 million bbl to 209.1 million bbl in the same period, while distillate fuel inventories were down 300,000 bbl to 167.4 million bbl (OGJ Online, Nov. 18, 2009).

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “Crude stocks in Cushing[, Okla.] continue to build, and with continued high imports from Canada into the Midwest we do not expect that trend to end just yet, and this provides a risk for the re-creation of a wider contango on West Texas Intermediate.”

He noted, “US refinery runs remain low (79.4% of operable capacity), but stocks of the main products are not drawing in a significant manner, and this makes for continued low implied demand. Imports of gasoline are low but supplies are not that greatly impacted by the lower refinery crude runs. Runs are down vs. the levels of 2007 and 2008, but gasoline production is either at par or above the levels of the last 2 years. Overall stocks of all petroleum products and crude were down 4.2 million bbl.”

Natural gas outlook
Analysts at Energy Solutions Inc., Verona, Wis., expect a “rather surprising” post-Thanksgiving Day rally in gas prices, followed by another price decline through the end of December, “which will set the stage for the first quarter decline and more attractive NYMEX prices for the second half of 2010, 2011, and maybe even 2012.”

They said, “This rally isn’t expected to be based on much of anything other than some short-covering, but it is likely to give buyers somewhat of a scare. That is why we still believe making some winter purchases in this weaker price environment is prudent and will help you sleep better at night. However, by mid-December, we anticipate that rally to falter primarily because of record-level storage inventories. Plus, with summer 2010 prices trading at a 50¢/MMbtu premium to December 2009, the incentive to keep gas in storage remains strong.”

Energy Solutions explained, “It isn’t economically sound for storage owners to withdraw gas at today’s lower prices and refill at next summer’s higher prices if there is sufficient gas supplies in the physical market. That being said, some withdrawals will have to occur simply because of operational requirements, but those withdrawals could very well be on the low side. Fears over production declines are going to help to support prices, but if those dissipate and demand doesn’t rebound, watch out—sub-$4 prices for the second half of winter will be feasible.”

Moderate temperatures are expected to last through the weekend, “and then a more seasonal pattern is going to set-in,” said Energy Solutions analysts. However, they said, “During the Thanksgiving Day holiday, many industrial businesses reduce consumption, so the colder weather may not impact natural gas prices as much as many expect.”

While NYMEX gas futures prices have fallen in the past week, cash market prices have strengthened. On Nov. 13, gas was trading in the physical market at $2.20-2.65/MMbtu, “with the exception of [Pacific Gas & Electric Co.] in California which was over $3/MMbtu,” Energy Solutions analysts said. As of Nov. 18, physical prices had gained at least $1/MMbtu “in virtually all locations.”

They said, “The anticipation of 2 more weeks of storage injections are expected to keep natural gas prices subdued even if the weather does turn colder. Beyond that, there isn’t much new on the natural gas side. Economic data continues to be mixed; crude oil futures prices continue to be strong at $79-80/bbl; winter weather forecasts remain mixed, although there now appears to be some increased consensus about the potential for strengthening El Niño conditions; storage continues to expand even though according to the EIA there is only around 76 bcf of space remaining to fill; and industrial demand remains sluggish. Overall, momentum is down, but there is significant price support at $4/MMbtu, which means it may be tough for the December NYMEX contract price to fall below this level.”

Energy prices
The December contract for benchmark US sweet, light crudes gained 44¢ to $79.58/bbl Nov. 18 on NYMEX. The price of that contract, which expires at the close of trade Nov. 20, has increased more than 4% since hitting a 1-month low Nov. 13. The January contract rose 38¢ to $80.10/bbl. On the US spot market, WTI at Cushing was up 44¢ to $79.58/bbl. Heating oil for December dipped by 0.99¢ to $2.05/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month inched up 0.65¢ to $2.01/gal.

The December natural gas contract fell 27.6¢ to $4.25/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., climbed 28¢ to $3.71/MMbtu. “The fundamentals remain very weak,” said analysts with Raymond James & Associates Inc. in Houston. “After peaking at more than $5/Mcf in the middle of October (up 4% during the month), natural gas has since plummeted below $4.50/Mcf as expectations for a frigid winter begin to melt away. Storage levels are at an all-time high above 3.8 tcf, and it appears injections could continue through the end of November (typically the first month of withdrawal season). To make matters worse, supply continues to gradually roll over.”

In London, the January IPE contract for North Sea Brent crude was up 50¢ to $79.47/bbl. Gas oil for December gained $11.75 to $643/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 90¢ to $77.87/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

MARKET WATCH: NYMEX oil prices settle above $51/bbl

02/09/2015 Crude oil prices rose on the New York market Feb. 6 to settle above $51/bbl after the Baker Hughes Inc. weekly rig count showed a decline of 87 rig...

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

PwC: Low oil prices might drive surge in restructuring in 2015

02/06/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

MARKET WATCH: NYMEX oil drops, ending 4-day rally

02/05/2015 Crude oil prices dropped on the New York market Feb. 4 to settle below $50/bbl and to end a 4-day rally after a weekly government report showed oil...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...
White Papers

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

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

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
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

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


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