MARKET WATCH: Crude oil falls below $72/bbl to 11-week low

Sam Fletcher
OGJ Senior Writer

HOUSTON, Aug. 25 -- Energy prices continued to tumble Aug. 24 with crude dropping 2% to an 11-week low below $72/bbl in the New York market after the National Association of Realtors reported sales of existing US homes plunged 27% to a 15-year low in July with expiration of the home-buying tax credit. Natural gas prices dipped 0.3%.

It marked the fifth successive session the price of the front-month crude contract has declined. “Dismal housing data set the tone for markets,” said analysts in the Houston office of Raymond James & Associates Inc. “Consequently, the Dow [Jones Industrial Average] made a brief appearance below the 10,000 mark before rebounding slightly to finish the day down 1.3%.” Energy prices followed the equity market's reaction to macro economic concerns and growing petroleum stockpiles that could signal a second dip in the recession.

However, analysts at Standard New York Securities Inc., part of the Standard Bank Group Ltd., reported “a brief revival” of crude prices in early trading Aug. 25, “partly due to dollar weakness.” Nevertheless, they said, “Dollar weakness has been abating, and global growth concerns now weigh on oil prices.”

Low home sales are just the latest in “the trend of macroeconomic data coming out worse than expected,” said Olivier Jakob at Petromatrix, Zug, Switzerland. Compared with the same period last year, sales are down heavily across the regions. “And that is despite the fixed mortgage rates falling to a record low during July (30-year rate),” he said.

“Given the continued deterioration in the macroeconomic data, we will continue to focus on the directional movement of the Standard & Poor’s 500 index, as the US petroleum stocks are too high to fuel any strong positive sentiment,” Jakob said.

In other news, Hurricane Danielle “is nothing to worry about as it will stay in the Mid-Atlantic,” Jakob said, “The storm off Cape Verde will be named Earl and is expected to become a strong hurricane (like Danielle), but it is expected to head north and should not be an issue for oil assets in the US Gulf of Mexico. However the National Hurricane Center currently has under watch a new disturbance that has developed right in the US gulf.” For now there is low probability it will be upgraded to tropical storm status.

US inventories
The Energy Information Administration said Aug. 25 commercial US benchmark crude inventories jumped by 4.1 million bbl to 358.3 million bbl in the week ended Aug. 20—“the third straight rise as we exit a relatively nonexistent driving season,” said Raymond James analysts. The consensus on Wall Street was for a more modest increase of 300,000 bbl. Gasoline stocks escalated 2.3 million bbl to 225.6 million bbl, whereas the market was expecting a decrease of 500,000 bbl. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories climbed 1.8 million bbl to 225.6 million bbl, exceeding traders’ expectations of a 1 million bbl build.

Imports of crude into the US increased by 320,000 b/d to 9.9 million b/d last week. In the 4 weeks through Aug. 20, crude imports averaged 9.6 million b/d, up by 589,000 b/d from the comparable period in 2009.

The input of crude into US refineries, however, declined by 348,000 b/d to 14.9 million b/d in the latest week, with units operating at 87.7% capacity. Gasoline production increased to 9.6 million b/d, while distillate fuel production increased to 4.4 million b/d.

The EIA weekly data have shown for the “past 12 consecutive weeks,” light product inventories of gasoline, distillate, and jet fuel have risen “due to high production levels, increased gasoline imports (including blend stocks), and lackluster demand,” said Jacques Rousseau, managing director of equity research, RBC Capital Markets, Reston, Va. Gasoline consumption last week was 3% higher than the comparable week last year, he said.

“After a strong second quarter, refining margins have declined sharply in August due to rising supply and lackluster demand. As a result of this weakness, we expect some refiners to lower production levels this month and coupled with the upcoming fall turnaround season (that starts in early September), lower supply should begin to reduce the current refined product inventory overhang, a potential near term positive for refining margins and stocks,” Rousseau said.

He said, “We estimate that the average US refining margin increased from approximately $7.27/bbl to $8.77/bbl over the past week (vs. an average of approximately $12/bbl in 2008 and $9/bbl in 2009).”

Energy prices
The October contract for benchmark US light, sweet crudes dropped $1.47 to $71.63/bbl Aug. 24 on the New York Mercantile Exchange. The November contract fell $1.37 to $72.36/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., broke its usual lock-step with the front-month crude futures contract and instead was down $1.89 to $71.21/bbl. Heating oil for September delivery lost 1.97¢ to $1.94/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month fell 3.16¢ to $1.84/gal.

The September natural gas contract was down 2.7¢ to $4.04/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 8¢ to $4.05/MMbtu.

In London, the October IPE contract for North Sea Brent crude fell $1.24 to $72.46/bbl. Gas oil for September lost $8.75 to $617.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was down $1.24 to $69.69/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Market watchers' adjustments offer hints of recovery

01/26/2015 Because markets look ahead, changes in standard forecasts offer potentially important signals during storms such as the one now pummeling the oil a...

A message from Oil & Gas Journal

12/15/2014

An important transition occurred during production of this issue of Unconventional Oil & Gas Report.

MARKET WATCH: Crude oil prices down as US government shutdown lingers

10/16/2013 The front month crude oil contract on the New York market dropped to the lowest level on Oct. 15 since it last settled below $100/bbl on July 2.

MARKET WATCH: Crude oil traded higher amid Washington budget talks

10/15/2013 Crude oil futures prices traded higher on the New York market Oct. 14 as US lawmakers reported progress in ongoing efforts toward reaching an agree...

MARKET WATCH: Oil prices close down at end of volatile week

10/14/2013 The NYMEX November crude contract lost 99¢ on Oct. 11, settling at $102.02/bbl ending a week of volatile trading. The December contract fell 83¢ to...

MARKET WATCH: Oil prices continue falling as Syria risk apparently lessens

09/17/2013 Oil futures prices reached their lowest level in 3 weeks with the Sept. 16 closing while the US and Russia agreed to terms under which Syria is exp...

MARKET WATCH: Oil prices rebound slightly awaiting US decision on Syria

09/04/2013 Oil prices climbed on New York and London markets Sept. 3 in response to comments indicating key US lawmakers will support US President Barack Obam...

MARKET WATCH: Syria crisis puts pressure on some oil markets

08/27/2013 Crude oil prices in world markets edged upwards Aug. 26 on reports that “tolerance of the West for what’s taking place in Syria appears to be comin...

MARKET WATCH: Oil futures rise Aug. 23 on Lebanon violence

08/26/2013 Oil futures prices rose on the New York market Aug. 23, and traders attributed the increase to escalating violence in the Middle East that added to...
White Papers

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

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...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

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

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


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


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