August rough on energy

Sam Fletcher
OGJ Senior Writer

August was a strenuous month for both commodity and equity markets—in fact, the worst August for the Dow Jones Industrial Average in 9 years, said analysts in the Houston office of Raymond James & Associates Inc.

In the month’s final trading session Aug. 31 on the New York Mercantile Exchange, the front-month October contract for benchmark US light, sweet crudes fell 3.7% to $71.92/bbl, compared with a closing of $78.95 July 30, the last session of that month.

Raymond James blamed the price drop in the final August session on fears Hurricane Earl would hamper East Coast travel over the long US Labor Day holiday, Sept. 4-6, which traditionally marks the end of the US summer driving season. Natural gas traders worried the category 3 storm could knock out gas-fired electrical power as it swept the Atlantic Coast from North Carolina as far north as Newfoundland and Labrador. Meanwhile, East Coast refineries prepared to shut down if threatened by the storm, possibly taking some product off the market.

Toward the end of August, crude prices struggled to regain a spot in the upper half of the $70-80/bbl trading range after being pushed lower by disappointing economic indicators, said analysts at KBC Energy Economics, a division KBC Advanced Technologies PLC in Surrey, UK.

Existing home sales were reported down 27.2% in July to a 15-year low. New housing starts in July dropped 32.4% year-on-year to a record low annual rate. House prices were reduced 4.8% in July. Moreover, the Goldman Sachs Group Inc. reported a 25-30% chance for a “double dip” recession that would again reduce energy demand and prices.

The only bright spot for the last full week of August was a Labor Department report initial claims for unemployment benefits fell for the first time in a month.

“The oil markets continue to look east towards Asia for demand growth while turning their backs on the bearish fundamentals being seen in the west,” said KBC analysts.

US inventories
The Energy Information Administration reported commercial US crude inventories gained 3.4 million bbl to 361.7 million bbl in the week ended Aug. 27. Gasoline stocks dropped 200,000 bbl to 225.4 million bbl Distillate fuel inventories fell 700,000 to 175.2 million bbl.

Import of crude into the US decreased 202,000 b/d to 9.7 million b/d in the same week. In the 4 weeks ended Aug. 27, crude imports averaged 9.6 million b/d, 530,000 b/d more than in the comparable period in 2009. The input of crude into US refineries was down 68,000 b/d to 14.8 million b/d last week, with units operating at 87% of capacity. Gasoline production declined to 9.3 million b/d in that period, while distillate fuel production decreased to 4.3 million b/d.

KBC analysts said, “Refinery utilization will have to be further reduced in the weeks ahead in order to control these ever-growing inventory levels. This will inevitably place pressure on crude prices and to test sub-$70/bbl levels in the weeks ahead unless some highly positive news starts to break.”

They said, “It is highly unlikely that the Organization of Petroleum Exporting Countries will call an extraordinary meeting prior to their scheduled gathering in mid-October; almost as unlikely as prices falling dramatically. Current production is around 2 million b/d over their agreed quota of 24.85 million b/d, but prices have resisted OPEC’s increasing output throughout the year so far. However, if oil prices fall below $70/bbl and threaten $60/bbl, there will be loud and clear messages in October by some of the more compliant countries, such as Saudi Arabia, Kuwait, and the UAE, for a concerted effort to be made by the almost non-compliant countries, such as Angola, Nigeria, Iran and Venezuela, to reduce output and prop up prices.”

However, they said, “The ever looming and considerable spare capacity of OPEC members will only be increased if this is the case; another bearish factor in the medium to long term.”

(Online Sept. 6, 2010; author’s e-mail: samf@ogjonline.com)

Related Articles

EIA: US oil output fell 50,000 b/d in May

07/07/2015 Total US crude oil production dropped 50,000 b/d in May compared with April and is expected to continue falling through early 2016 before growth re...

Obama urged by IPAA president to lift ban on US crude exports

07/07/2015 Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of ...

MARKET WATCH: NYMEX, Brent oil prices take dive on world oil oversupply concerns

07/07/2015 US light, sweet crude oil prices plummeted more than $4/bbl on the New York market July 6, marking a 5-month low, while Brent crude oil prices on t...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

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...

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...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

Survey begins of collaboration on the UKCS

06/30/2015

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

MARKET WATCH: NYMEX, Brent crude oil prices slump on Greek default fears

06/30/2015 US light, sweet crude oil futures and Brent crude oil futures for August delivery each settled down by more than $1/bbl on June 29, with Brent slid...
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

On Demand

OGJ's Midyear Forecast 2015

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

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


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