MARKET WATCH: Oil prices resume downward spiral

Sam Fletcher
OGJ Senior Writer

HOUSTON, Aug. 11 -- Oil prices resumed their downward spiral Aug. 10 in the New York market, giving back more than the gains from the previous session on disappointing trade numbers with China and reports business productivity declined for the first time in more than a year.

The market’s ups and downs would have done justice to a theme-park rollercoaster, said analysts in the Houston office of Raymond James & Associates Inc., falling in early trading on unfavorable macroeconomic news but rebounding some in the afternoon after the Federal Reserve System announced it would continue buying Treasury securities.

“The Fed's evident concerns for recovery partially offset by its remedy of additional liquidity left the market down marginally,” with the Dow Jones Industrial Average down 55 points, Raymond James analysts reported. “Oil largely followed the broader market to settle down 1.5% on the day. The productivity report supported comments from the Fed that the pace of economic recovery (and petroleum product demand) may be ‘more modest’ than expected in the near term.” They reported natural gas traded relatively flat on the futures market, down 0.6% on dissipating weather support.

The front-month crude contract dropped 1.5% “as concerns about the slowdown in recovery were bolstered by the weak economic data,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. “The Labor Department reported that the US labor productivity declined by an annual rate of 0.9% in the second quarter vs. consensus of 0.1% gain.” There were additional indications the job market is struggling as labor costs increased by only 0.2% vs. a consensus for a 1.5% increase, he said.

Sharma said, “Slowing Chinese crude imports, which fell 15% month-over-month in July, added further pressure on prices. However, in the near term, a developing tropical storm in the southeast Gulf of Mexico might provide some relief to crude from the negativity of economic indicators.”

Prevailing concerns about the slowdown of economic recovery in the second half of 2010 are keeping natural gas prices under pressure as well. “Prices fell to the lowest in 10 weeks on forecasts of cooler weather moving into the Midwest and Northeast over the next few days,” Sharma said. “The Energy Information Administration now expects hurricanes will cause 146 bcf of supply loss due to shut-ins from August through October. However, we will not write off the summer cooling demand yet and expect natural gas to find more price support at these levels due to the fuel-switching.”

Pritchard Capital Partners noted a report in the Aug. 11 edition of The Wall Street Journal that energy industry insiders “are up in arms” over new disclosure rules added to pending financial regulation legislation. “The provision to the Dodd-Frank law orders resource companies to reveal royalties, bonuses, and other payments to governments for the ‘commercial development of oil, natural gas, or minerals,’” analysts said. ExxonMobil Corp. and other international oil companies “believe this level of transparency will hurt competitiveness of US integrated and E&P companies by providing competitors with specific terms of pending transactions. Inversely, the move potentially helps smaller players like Murphy Oil Corp. or Anadarko Petroleum Corp. to work their way into concessions formerly dominated by major integrated [firms],” they said.

In other news, the International Energy Agency in Paris reported crude futures prices trended higher in July on stronger financial markets and supply outages in the Gulf of Mexico and the North Sea. “By early August, prices rose to their highest level in 3 months before retreating on more comfortable supplies and concerns over the global economic recovery,” it said.

IEA revised its global oil demand estimates higher, up 2.2% to 86.6 million b/d for 2010 and up 1.5% to 87.9 million b/d in 2011, based on stronger assumptions of gross domestic product and baseline adjustments. However, it said, “Weaker economic recovery, a third lower than the base case, would cut the 2010 and 2011 prognoses by 290,000 b/d and 1.2 million b/d, respectively.”

It said global oil supply rose 850,000 b/d to 87.2 million b/d in July, as Norwegian maintenance ended and the Organization of Petroleum Exporting Countries boosted supplies. Non-OPEC supply estimates for 2010 were hiked to 52.6 million b/d, rising to 52.9 million b/d in 2011.

US inventories
The Department of Energy’s EIA said Aug. 11 commercial US crude inventories fell 3 million bbl to 355 million bbl in the week ended Aug. 6, exceeding the Wall Street consensus for a 2 million bbl drop. Gasoline stocks increased by 400,000 bbl to 223.4 million bbl, surpassing the market’s outlook for a 300,000 bbl gain. Finished gasoline inventories were virtually unchanged while blending components inventories increased. Distillate fuel inventories climbed 3.5 million bbl to 173.1 million bbl, nearly twice Wall Street’s expectation of a 1.8 million bbl gain.

Imports of crude into the US declined by 188,000 b/d to 9.4 million b/d last week, EIA reported. In the 4 weeks through Aug. 6, US crude imports averaged 10.1 million b/d, up 539,000 b/d from the comparable period in 2009. Total gasoline imports (including both finished gasoline and blending components) averaged 1 million b/d last week. Distillate fuel imports averaged 315,000 b/d.

The input of crude into US refineries dropped by 509,000 b/d to 15.1 million b/d in the week ended Aug. 6, with units operating at 88.1% of capacity. Gasoline production decreased to 9.3 million b/d, while distillate fuel production decreased slightly to 4.3 million b/d.

Energy prices
The September contract for benchmark US light, sweet crudes lost $1.23 to $80.25/bbl Aug. 10 on the New York Mercantile Exchange. The October contract dropped $1.24 to $80.71/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.23 to $80.25/bbl. Heating oil for September delivery declined 2.48¢ to $2.13/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month fell 3.34¢ to $2.09/gal.

The September natural gas contract dipped 1.2¢ to $4.30/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 10¢ to $4.43/MMbtu.

In London, the September IPE contract for North Sea Brent crude lost $1.39 to $79.60/bbl. Gas oil for August fell $11 to $669.50/tonne.

The average price for OPEC’s basket of 12 reference crudes dropped $1.41 to $76.87/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Linn Energy, Quantum complete AcqCo deal

07/06/2015 Linn Energy LLC, affiliate LinnCo LLC, and Quantum Energy Partners have signed definitive agreements to fund the acquisition and development of oil...

MARKET WATCH: NYMEX oil prices fall on rise in US rig count

07/06/2015 US light, sweet crude oil prices edged down going into the July 4 holiday weekend on the New York market after Baker Hughes Inc. reported July 2 th...

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

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

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
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

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

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


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