MARKET WATCH: Crude oil price climbs; natural gas price falls

Sam Fletcher
OGJ Senior Writer

HOUSTON, June 17 -- As traders shrugged off a bearish government report of US oil inventories June 16, the front-month crude contract climbed to a 5-week high closing above $77/bbl. Natural gas, meanwhile, lost momentum, dropping 4% to below $5/MMbtu in the New York market.

The Energy Information Administration said commercial US crude inventories increased by 1.7 million bbl to 363.1 million bbl in the week ended June 11, compared with a Wall Street consensus for a 1 million bbl decline. US gasoline stocks dropped 600,000 bbl to 218.4 million bbl, while the market expected no change. EIA said distillate fuel inventories climbed 1.8 million bbl to 156.6 million bbl. The Wall Street consensus was for a 1 million bbl increase (OGJ Online, June 16, 2010).

“Crude inventories for the week rose by 1.7 million bbl, driving the majority of the build,” said analysts in the Houston office of Raymond James & Associates Inc. “Energy stocks traded higher most of the day but had a lackluster ending and closed just below the flat broader market.”

EIA reported June 17 the injection of 87 bcf of natural gas into US underground storage in the week ended June 11, slightly lower than the consensus. That increased working gas in storage to 2.54 tcf, up 2 bcf from the storage figures a year ago and 313 bcf above the 5-year average.

Natural gas fell for the first time in 4 days as it became more economical to burn coal than gas in most parts of the US. “The baseload fuel-switching parity price for natural gas is around $4.50[/MMbtu] at $60 Central Appalachian coal and rises approximately 6¢ for every dollar increase in coal prices,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. “Natural gas was also weighed down by a bearish report from the Commerce Department, which showed that housing starts fell by 10% to a 593,000 annual rate in May, while economists were expecting an annual rate of 648,000.”

BP under pressure
Raymond James analysts said the agreement by BP PLC executives to suspend dividend payments to shareholders for the rest of this year and not pay the first quarter dividend already declared and to make quarterly cash payments into the $20 billion claims fund administered by an independent third party may defuse some of the harsh political rhetoric against the company, at least from the White House.

“As far as the cash impact of the agreement, BP will save about $8 billion from the suspended dividend (over three quarters) and also plans to cut capital spending by 10% in addition to accelerating asset sales. The company will be responsible for no more than $100 million in claims from workers laid off due to the deepwater drilling moratorium [imposed by Obama]. However, the initial $20 billion is by no means a ceiling for claims and does not account for the fines and penalties the company will likely be facing over the next several years,” Raymond James reported.

Raymond James analysts noted an “interesting article” in the June 17 New York Times reporting annual oil spills the volume of the 1989 Exxon Valdez disaster are estimated to have occurred in the Niger Delta for the last 50 years. “There is a great deal of controversy as to whether the leaks are due to negligent pipe maintenance by some of the oil producers or whether it's a result of sabotage and thievery,” said Raymond James analysts. “Regardless, the situation in Nigeria represents a useful comparison to the current crisis in the Gulf of Mexico.”

Meanwhile, Apache Corp. Chairman and Chief Executive Officer Steve Farris expressed doubt any deepwater drilling will occur in the Gulf of Mexico if Congress does require a $10 billion liability policy in the future. “At least, [Apache] does not intend to drill in the deepwater if that becomes a reality and at least four other major deepwater gulf players have expressed the same sentiment,” Sharma reported. Apache might keep all of its present deepwater wells, however, Farris said.

Farris expects increased regulation of casing program design, more testing of blowout preventers, and fewer companies drilling deepwater wells in the gulf. Those who do will likely to have fewer partners “to control the risk of an event,” he said.

Pritchard Capital Partners reported, “From a macro standpoint there are concerns that industry’s willingness to take risks to find new supplies would be impacted and that government needs to take that factor into account. Liability all the way up the chain to the chief executive officer will hamper deepwater investment in [Farris’s] view. Unlike Sarbanes Oxley, which has an out for honest mistakes, the level of accountability for accidents looks nearly unreasonable and aspects of the proposed laws will be a major deterrent to drilling.”

Energy prices
The July contract for benchmark US light, sweet crudes gained 73¢ to close at $77.67/bbl June 16 on the New York Mercantile Exchange—“the highest settlement price since May 5 on a product-driven rally,” Sharma said. Crude reached an intraday high of $78.13/bbl “before profit-taking pulled it down to the settle. The increased political risk to crude production in the US is also causing anxiety in the market, propelling prices higher,” he said. The August contract increased 81¢ to $78.72/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 73¢ to $77.67/bbl.

Heating oil for July delivery climbed 4.16¢ to $2.11 gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 2.37¢ to $2.15/gal. The July natural gas contract dropped 21.1¢ to $4.99/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 1¢ to $5.11/MMbtu.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 98¢ to $74.15/bbl.

Contact Sam Fletcher at

Related Articles

Nelson vows to block Murkowski’s stand-alone crude oil bill

07/31/2015 The US Senate Energy and Natural Resources Committee approved Chair Lisa Murkowski’s (R-Alas.) bill to end the ban on exporting US-produced oil. Bu...

Industry 2Q earnings, jobs dissolve amid continued oil-price slump

07/31/2015 A difficult year thus far for the integrated, multinational oil and gas firms caused by low oil prices has been somewhat eased by improved producti...

OGUK survey shows ‘slight improvement’ in outlook in second quarter


The UK oil and gas industry remains fragile, but the outlook has improved in the second quarter, according to Oil & Gas UK.

Phillips, ETP, Sunoco JV to build, operate Bayou Bridge oil pipeline

07/31/2015 Phillips 66, Houston; Energy Transfer Partners LP (ETP), Dallas; and Sunoco Logistics Partners LP, Philadelphia, have formed a joint venture to con...

MARKET WATCH: Oil futures fall on strengthening dollar

07/31/2015 Light, sweet crude oil prices started July 30 trading with a gain on the New York market, but prices had slipped moderately by settlement, which an...

MOL acquires Czech, Slovak retail assets


MOL Group, Budapest, completed its acquisition from Eni SPA of retail outlets in the Czech Republic and Slovakia.

FRA issues final rule to keep unattended trains from rolling away

07/31/2015 The Federal Railroad Administration issued a final rule to prevent unattended trains carrying crude oil, ethanol, or other highly flammable content...

Joint venture advances plan for grassroots refinery in North Dakota

07/30/2015 Quantum Energy Inc., Tempe, Ariz., and a joint-venture partner Native Son Holdings LLC (NSH), The Woodlands, Tex., have filed a minor-source air qu...

Shell to shed Japanese refining assets

07/30/2015 Royal Dutch Shell PLC has entered a deal to sell nearly all of its interest in Japanese refiner Showa Shell Sekiyu KK to Idemitsu Kosan Co. Ltd. as...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

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
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


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