MARKET WATCH: Weather raises crude oil, natural gas prices

Sam Fletcher
OGJ Senior Writer

HOUSTON, July 21 -- With a tropical storm developing in the Caribbean, the expiring August contract for crude oil increased 1.2% July 20 in the New York market, with natural gas up 1.8% in its first increase in three sessions.

Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, said, “The National Hurricane Center is projecting that the weather system in the Caribbean has a 60% chance of becoming a tropical cyclone” that might threaten oil and gas production in the Gulf of Mexico. He said, “Crude got some support from the equities market as well, which rose after the Commerce Department reported an increase in the building permits.”

Forecasts that a heat wave will broil the US East Coast later this week also gave gas prices a boost. In addition, the Wall Street consensus is for a report July 22 of another below-average injection of gas into US underground storage, Sharma said.

US inventories
The Energy Information Administration said July 21 commercial US crude inventories increased 400,000 bbl to 353.5 million bbl in the week ended July 16, counter to Wall Street’s consensus for a drop of 1.2 million bbl. Gasoline stocks climbed 1.1 million bbl to 222.2 million bbl in that same week, exceeding traders’ expectations of a 700,000 bbl increase. Distillate fuel inventories jumped by 3.9 million bbl to 166.6 million bbl, surpassing market forecasts for a 1.5 million bbl build.

The American Petroleum Institute earlier reported a 241,000 bbl decline in crude stocks to 353.3 million bbl, with gasoline inventories down 412,000 bbl to 221.4 million bbl, and distillate fuel stocks registering the only increase, up 979,000 bbl to 161.9 million bbl.

Imports of crude into the US increased that week by 696,000 b/d to 10 million b/d. Over the 4 weeks through July 16, US crude imports averaged 9.5 million b/d, up by 203,000 b/d from the comparable 4-week period in 2009.

The input of crude into US refineries increased only 48,000 b/d to 15.5 million b/d last week, however, with units operating at 91.5% of capacity. Gasoline production declined to 9.3 million b/d; Distillate fuel production increased to 4.5 million b/d.

Energy prices
The expiring August contract for benchmark US light, sweet crudes gained 90¢ to $77.44/bbl July 20 on the New York Mercantile Exchange. The new front-month September contract advanced 68¢ to $77.58/bbl.

On the US spot market, West Texas Intermediate at Cushing, Okla., was up 90¢ to $77.44/bbl. Heating oil for August delivery inched up 0.77¢ but remained virtually unchanged at a rounded $2.02/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 1.96¢ to $2.08/gal.

The August gas contract rebounded 8¢ to $4.59/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 4¢ to $4.61/MMbtu.

In London, the September IPE contract for North Sea Brent crude rose 60¢ to $76.22/bbl. Gas oil for August lost $1.50 to $647/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 22¢ to $73.16/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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