MARKET WATCH: Crude oil prices rebound; gas futures price declines

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 11 -- The front-month crude contract rebounded strongly Nov. 11 to a near 2-year intraday high above $88/bbl before closing up 1.3%—enough to boost energy stock prices. The natural gas price declined despite a smaller-than-expected injection in US storage but remained above $4/MMbtu.

“After tracking both the dollar and the broader market in recent weeks, crude took its cues from a very bullish Department of Energy petroleum inventories report yesterday, which showed a significant and unexpected draw in crude oil inventories,” said analysts in the Houston office of Raymond James & Associates Inc.

DOE’s Energy Information Administration said commercial US crude inventories fell 3.3 million bbl to 364.9 million bbl in the week ended Nov. 5, surpassing Wall Street’s consensus for a drop of 1.5 million bbl. Gasoline inventories were down 1.9 million bbl to 210.3 million bbl in the same period, compared with market expectations of a 1.5 million bbl decline. Distillate fuel inventories dropped 5 million bbl to 159.9 million bbl, far outpacing the 1 million bbl loss anticipated by analysts (OGJ Online, Nov. 10, 2010).

“The crude contract for December delivery surged to the highest level since Oct. 8, 2008,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. Distillate consumption last week was at “the highest level since August 2008, signaling a pick-up in the economic activity,” he said.

Leon Westgate at Standard New York Securities Inc., the Standard Bank Group, reported, “The decrease of US oil inventory was mainly due to a further decline in imports. It’s perhaps worth noting that the recent flattening of the contango structure makes the storage and cash-and-carry play increasingly uneconomic. Therefore, the incentive to import more oil, which will end up in storage, is also diminishing.”

Westgate added, “The latest Chinese data show refinery runs continued to pick up in October, as the maintenance season comes to an end. As far as the macroeconomic data is concerned, the October figures for retail sales and fixed asset urban investment were broadly aligned with expectations. However, inflation picked up further…. This could prompt more tightening measures from the government, though with commodities viewed as a hedge by some participants, the impact on commodity prices is not clear cut.”

DOE reported a total stock draw close to 12 million bbl with most of the visible draw in Petroleum Administration for Defense Districts (PADD) 2 in the Midwest and PADD 1 on the East Coast. PADD 3 along the Gulf Coast “had only a marginal stock draw,” said Olivier Jakob at Petromatrix, Zug, Switzerland.

“Given that the draws of the last 5 weeks were from record-high levels, the US is still at multiyear high stock levels for the season and needs to draw another 60-80 million bbl by the end of the year before reaching the stock level that is being priced. The US has to draw stocks in the fourth quarter; otherwise refineries can not run in the first quarter, and while the overhang is being reduced there is still some road to go before the US supply situation could be described as tight,” he said.

Distillates and gasoline stocks have been coming down in PADD 1 and are below the high levels of a year ago but still above the levels of 2007-08. “Imports of gasoline have not been visibly impacted by the French strikes, but US refinery runs on the East Coast have been extremely low at 58.1% capacity utilization,” said Jakob.

However, ConocoPhillips’ 238,000-b/d Bayway refinery in Linden, NJ, is in the restart process following maintenance, as is the 300,000-b/d Irving refinery in St John, NB. “Therefore we expect to see a product supply improvement in coming weeks for the East Coast,” he said.

The 1.3 million bbl draw from crude stocks on the Gulf Coast was “insignificant given that Gulf Coast crude oil stocks are well above the level of previous years for the season,” Jakob said. “Crude oil imports to the Gulf Coast are steady, and overall for the US crude oil imports from Canada, Mexico, and Saudi Arabia have been increasing. Crude oil imports from West Africa have been on a downtrend, but that ties-in with the lower operating rates on the East Coast.”

Natural gas
EIA also reported the injection of 19 bcf of natural gas into US underground storage during the week ended Nov. 5, far short of the Wall Street consensus for an injection of 23 bcf. That brought working gas in storage to a record 3.84 tcf; that’s 31 bcf higher than in the same period a year ago and 342 bcf above the 5-year average.

The lower-than-expected gas injection likely was the result of “incremental fuel-switching induced demand from the utilities…added to the gas home-heating demand,” Sharma said. “About 52% of US households use natural gas for heating.”

He said, “We believe that besides the weather driven increase in gas home-heating demand, utilities too would take advantage of these attractive prices propping up the cash markets.”

Energy prices
The December contract for benchmark US light, sweet crudes hit an intraday high of $88.21/bbl but then retreated to close at $87.81/bbl Nov. 10, up $1.09 for the day on the New York Mercantile Exchange. The January contract gained 94¢ to $88.29/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., advanced $1.09 to $87.81/bbl.

Heating oil for December delivery increased 3.52¢ to $2.44/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month climbed 5.12¢ to $2.24/gal.

The December natural gas contract fell 16.4¢ to $4.05/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 21.3¢ to $3.98/MMbtu.

In London, the December IPE contract for North Sea Brent crude was up 63¢ to $88.96/bbl. Gas oil for November gained $6.25 to $753.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 35¢ to $85.27/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

WOTUS rule implementation uncertain after conflicting court decisions

08/28/2015 The US Environmental Protection Agency and Army Corps of Engineers reportedly began to implement their controversial Waters of the United States (W...

Keystone XL decision isn’t imminent, White House press secretary says

08/28/2015 A presidential decision on TransCanada Corp.’s cross-border permit application for its proposed Keystone XL crude oil pipeline is not imminent, Whi...

Extension sought for Mackenzie Gas Project

08/28/2015 The earliest possible construction start for the Mackenzie Gas Project, which would connect natural gas fields in the Canadian Arctic with northwes...

Tap Oil signs PSC for block offshore Myanmar

08/28/2015 Tap Oil Ltd. reported its entry into Myanmar following the signing of the production-sharing contract for shallow-water Block M-7 in the Moattama b...

EIA: US oil, gas supply less vulnerable to hurricanes in 2015

08/28/2015 A relatively light hurricane season anticipated for 2015 and an overall decline in the Gulf of Mexico’s share of US crude oil and natural gas produ...

Rosneft, Egas sign master LNG supply, purchase deal

08/28/2015

Rosneft Group unit Rosneft Trading SA and Egyptian Natural Gas Holding Co. (Egas) have signed a master LNG supply and purchase agreement.

MARKET WATCH: NYMEX, Brent crude oil prices both surge in one-day rally

08/28/2015 The crude oil price for October delivery settled up nearly $4/bbl on the New York market Aug. 27, marking its biggest single-day gain in more than ...

PetroChina reports first half results

08/27/2015

PetroChina Co. Ltd. reported first-half increases in output of crude, natural gas, and refined products compared with a year earlier.

BLM brings its Master Leasing Plan concept to Utah

08/27/2015 The US Bureau of Land Management’s Moab, Utah, field office began a 90-day comment period on Aug. 21 for a draft proposed Master Leasing Plan for 9...
White Papers

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

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
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When 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.

register:WEBCAST



On Demand

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

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


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


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