MARKET WATCH: Energy prices continue climbing with weak dollar

Sam Fletcher
OGJ Senior Writer

HOUSTON, June 1 -- Stronger prospects for the financial bailout of Greece pushed the euro to a 3-week high against the dollar, and the weaker dollar raised crude prices 2% on May 31 in the New York market.

“The broader market shook off weak economic data from the US to end the month on a positive note,” said analysts in the Houston office of Raymond James & Associates Inc. “Not to be outdone, natural gas rose 3% on forecasts for warmer temperatures.”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “Oil finished strongly on the last day of May despite soft macroeconomic data from the US.” Oil products largely tracked gains in crude with reformulated blend stock (RBOB) falling slightly behind on the New York Mercantile Exchange. The term structure for West Texas Intermediate strengthened on news the Keystone Pipeline that carries Canadian crude to Cushing, Okla., will be shut down “for a few days” to repair a leak (OGJ Online, May 31, 2011).

“Net for May, front-month WTI and Brent lost $11.23/bbl and $9.16/bbl, respectively, after contracts hit their respective 2-year highs in April,” Zhang reported. “The drops in crude prices mostly took place during the first week of May. Since then, crude has been trading in a consolidation mode in the past 3 weeks. The recent Commodity Futures Trading Commission reports reveal some of the net speculative length has diminished after the record highs at the start of May. Oil market fundamentals continue to tighten up, which poses further upside risks to oil prices.”

He noted Japan’s weekly crude throughput dropped to 2.73 milion b/d last week, the lowest level in 5 years, while commercial crude inventories remained at seasonal highs. “With weak demand for crude from Japan, Dubai crude continues to trade at a heavy discount to Brent. This is likely to make the Organization of Petroleum Exporting Countries cautious about raising production, as incremental OPEC production is more likely to be of a similar quality to Dubai crude (heavy and of high sulfur content).”

Because of a weaker dollar, US economic data “failed to impress yet again,” with declining house prices and weaker-than-expected consumer confidence. Zhang said, “China’s office Manufacturing Purchasing Managers Index (PMI) for May was reported at 52, from 52.9 in April.

With the US and Chinese economies still showing signs of softening, oil market sentiment will likely suffer, “which might keep the oil market muted for longer than thought,” Zhang said. However, with the June 8 OPEC meeting and the crucial US nonfarm payrolls report scheduled for release June 3, “volatility could shoot up,” he said. “Still, some of the weakness in the economy was caused by supply disruptions following the earthquake in Japan, which could prompt a rebound. In addition, an increasingly tight oil market poses further upside risks to the oil price in the medium term.”

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “Making a positive spin out of the macroeconomic data released yesterday should be a difficult exercise for anyone. First of all the Case-Schiller Index of house prices showed a double dip, breaking the 2009 lows and falling to the lowest level since 2002. Then there was the Chicago PMI that showed the largest monthly drop since October 2008 [to the] the lowest level since November 2009.”

On top of that, he said, “The conference board confidence index showed a decline and is at the lowest level of the year.”

Jakob said, “The European side of the Atlantic was not really better. French consumer spending in April dropped 1.8% and follows a 1% [decline] in March; the drop in April being mostly on the back of a fall of 10.2% in automobile sales. The only bright spot yesterday was the German retail sales number [up] 0.6%, but that is only a positive for those who choose to ignore that the expectations were [for an increase of] 1.8%.

In other news, Jakob noted, “Today is the first day of the official hurricane season” for the Atlantic and the Gulf of Mexico.

The weekly US oil inventory report will be released June 2 due to the Memorial Day holiday May 30.

Energy prices
The July contract for benchmark US light, sweet crudes traded at $99.60-103.39/bbl May 31 on NYMEX, before closing at $102.70/bbl, up $2.11 for the day. The August contract also increased by $2.11 to $103.27/bbl. On the US spot market, WTI at Cushing also was up $2.11, matching the front-month futures price of $102.70/bbl.

Heating oil for June delivery climbed 6.58¢ to $3.06/gal on NYMEX. RBOB for the same month increased 5.84¢ to $3.15/gal.

The July natural gas contract rose 14.8¢ to $4.67/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 21.1¢ to $4.63/MMbtu.

In London, the July IPE contract for North Sea Brent crude advanced $2.05 to $116.73/bbl. Gas oil for June jumped $19.25 to $962/tonne.

The average price for OPEC’s basket of 12 reference crudes was up $1.61 to $111.20/bbl. OPEC’s Vienna office will be closed June 2.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

API: US petroleum demand rose in June, second quarter

07/16/2015 Total US petroleum deliveries, a measure of demand, increased 4.2% from June 2014 to average 19.6 million b/d last month. In the second quarter, de...

ConocoPhillips plans further capex reduction for deepwater exploration

07/16/2015 ConocoPhillips reported plans to further reduce its capital expenditures for deepwater exploration, with the “most significant reductions” coming f...

DOE official: LNG exports could be limited by silt-clogged waterways, ports

07/16/2015 Silt, which is increasingly filling US waterways and ports, potentially could limit US LNG exports if it is not dredged soon, a top US Department o...

Fitch notes increase in energy-default rate

07/16/2015 Recent actions of two exploration and production companies have pushed the trailing 12-month energy default rate among issuers of high-yield bonds ...

ENOC trims Turkmen plan in Dragon takeover

07/16/2015 Emirates National Oil Co. Ltd. (ENOC), Dubai, will lower target oil production from the Cheleken area offshore Turkmenistan after acquiring full co...

KMI to buy Shell’s stake in Elba LNG project for $630 million

07/16/2015 Kinder Morgan Inc., Houston, has reached a deal with Royal Dutch Shell PLC to purchase 100% of Shell’s equity interest in Elba Liquefaction Co. LLC...

Genesis to buy Enterprise offshore pipelines

07/16/2015 Genesis Energy LP has agreed to buy the Gulf of Mexico pipelines and services business of Enterprise Products Partners LP for $1.5 billion cash.

Mexican round nets two successful bids

07/16/2015 Two of 14 shallow-water blocks received successful bids on July 15 in Mexico’s historic Round One offering of exploration and production rights (OG...

CAPP: Canada needs global LNG markets for gas production growth

07/16/2015 Canada needs to connect to global LNG markets to avoid a decade of decline in natural gas production, according to the Canadian Association of Petr...
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