MARKET WATCH: Crude oil accelerates loss; natural gas also down

Sam Fletcher
OGJ Senior Writer

HOUSTON, May 4 -- The front-month crude oil contract fell more than 2% May 3 in the turbulent New York market as the dollar strengthened and traders worried about above-average inventories. Natural gas was down a modest 0.5%.

Corporate energy stocks also were pulled lower, with a 3% decline in the Oil Service Index and SIG Oil Exploration & Production Index (EPX) down 3.5% while the equity market was relatively flat, said analysts in the Houston office of Raymond James & Associates Inc.

Oil and gas prices continued falling in early trading May 4. Equity stocks also fell sharply in early trading after Automatic Data Processing Inc.’s National Employment Report showed 179,000 new private sector jobs were added in April, far less than expected. The Institute for Supply Management (ISM) reported its service sector index rose at the slowest pace in 8 months. The two reports signify a weakening economy.

“Oil was under continued selling pressure yesterday, with both crude and oil products registering sizable losses,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. Compared with “the weakening flat prices,” he said, “the term structures of West Texas Intermediate and North Sea Brent remain largely unchanged.”

Zhang said, “In the financial markets, the dollar paused in its recent decline, which put some pressure on commodities yesterday. However, our view is that the dollar’s decline is not over yet, and it’s likely to test the low seen in 2008. Meanwhile, the negative sentiment, owing to a sharp decline in silver over the past few trading sessions (triggered by a rapid increase in margin requirements), has spilled over into the other commodity markets. This, too, is likely to be a temporary factor.”

He said, “We see the bias remaining to the upside owing to raised geopolitical risks, tighter global monetary policies, and the strengthening economy.”

Other analysts at the Standard Bank Group said, “Data in the next few days will put the focus on monetary policy again. From Europe and China, we expect events to be generally negative for industrial commodities. The US data should confirm medium-term support, especially for gold.”

Standard Bank does not expect another rate hike as in April at the European Commerce Bank meeting on May 5. However, analysts said, “The bank’s stance will probably be hawkish. The impact on commodity prices may be seen via the euro-dollar exchange rates, but we doubt that this will be a substantial commodity market moving event.”

On May 3, the market price of silver dropped 17.5% from the highs of Apr. 29, said Olivier Jakob at Petromatrix, Zug, Switzerland.

As the second phase of the Federal Reserve System’s quantitative easing program comes to a slow end, Jakob said, “The passive investors need soon to make the decision whether to cash in on the commodity returns of the last 6 months or stay the course as in 2008 with the risk of losing it all again.”

He said, “Given that the rise in the equity indices has more to do with the rise of oil shares than of financial shares, a downward correction in oil will also be negative for [corporate stocks on] the Standard & Poor’s 500 Index. From equity indices to commodity indices, global markets are in need of a further crush on the dollar to maintain the positive momentum. Yesterday the dollar index was slightly higher, but it will need to be pushed lower to prevent a systemic correction lower in commodity and equities.”

In other news, Stephen Harper’s Conservatives “won big” in Canada’s May 3 federal election, moving “from a minority to a majority government,” said Raymond James analysts. “Oil sand producers are surely breathing a sigh of relief as there was a real possibility that the leftist National Democratic Party (NDP) could win enough seats to partner with the Liberals in a coalition government,” they said. “The NDP ran on plans for a national carbon trading program, which the Liberals and the Bloc Quebecois also support. The Conservatives are staunchly opposed to cap-and-trade and carbon taxes. Their win is another sign that support for those policies is eroding not only in the US but globally as well.”

US inventories
The Energy Information Administration said May 4 commercial US benchmark crude inventories increased 3.4 million bbl to 366.5 million bbl in the week ended Apr. 29, above average for this time of year. The Wall Street consensus was for a 2 million bbl gain. Gasoline stocks lost 1 million bbl to 204.5 million bbl in the same period, exceeding analysts’ expectations of a 500,000 bbl decrease. Finished gasoline inventories declined while blending components stocks increased. Distillate fuel inventories fell 1.4 million bbl to 145.1 million bbl, compared with the market outlook for a 500,000 bbl increase.

The American Petroleum Institute earlier reported a 3.2 million bbl gain in US crude stocks to 364.2 million bbl in that same week. API officials said gasoline inventories were up 680,000 bbl to 211.3 million bbl, while distillates fell 1.5 million bbl to 146.9 million bbl.

Imports of crude into the US were down 389,000 b/d last week to 8.9 million b/d, EIA said. In the 4 weeks through Apr. 29, US crude imports averaged 8.7 million b/d, down by 839,000 b/d from the comparable period in 2010. Gasoline imports averaged 1.1 million b/d while distillate fuel imports averaged 197,000 b/d.

The input of crude into US refineries dipped by 18,000 b/d to 14.1 million b/d during the latest week, with units operating at 82.8% of capacity. Gasoline production decreased slightly to 8.8 million b/d, and distillate fuel production increased to 4.2 million b/d.

Energy prices
The June contract for benchmark US light, sweet crudes accelerated its decline May 3 on the New York Mercantile Exchange, dropping $2.47 to $111.05/bbl. The July contract lost $2.48 to $111.56/bbl. On the US spot market, WTI at Cushing, Okla., was down $2.47 to $111.05/bbl.

Heating oil for June delivery fell 6.13¢ to $3.19/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 1.85¢ to $3.33/gal.

The June natural gas contract decreased by 2.3¢ to $4.67/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.5¢ to $4.62/MMbtu.

In London, the June IPE contract for North Sea Brent crude dropped $2.67 to $122.45/bbl. Gas oil for May fell $20.75 to $1,019/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was down $1.15 to $118.75/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


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


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

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