MARKET WATCH: Crude oil posts modest gains in New York market

Crude oil prices advanced Aug. 22 in the New York market, more on indications of strengthening European markets than from bullish sentiment over the likely fall of Libyan dictator Moammar Gadhafi.

“The spread between West Texas Intermediate and Brent crude, which hit a record high on Aug. 19, narrowed as WTI gained 2% on the last day of trading for the September contract and Brent fell modestly on prospects for resolution in Libya,” said analysts in the Houston office of Raymond James & Associates Inc. “Meanwhile, natural gas fell 1% on mild forecasts for the Northeast and Midwest. Taking the cue from gas and Brent, energy stocks underperformed, with the Oil Service Index and [SIG Oil Exploration & Production Index] EPX falling 1% and 2%, respectively. With a fairly light economic calendar this week, market players remain in a ‘wait and see’ mode ahead of [Federal Reserve System Chairman Ben Bernanke’s speech] set for Aug. 26.”

Meanwhile, broader market futures, crude, and gas prices were higher in early trading Aug. 23. Olivier Jakob at Petromatrix in Zug, Switzerland, noted, “The fall of Tripoli has brought for now only a small reduction in the Brent premium to WTI, but through a flat price increase in WTI rather than a price fall in Brent. For now, we remain in a trading pattern where ICE Gas oil or ICE Brent is not allowed to fall below their 200-day moving average.”

Meanwhile, Saif al-Islam Gadhafi, the dictator’s son, has appeared on state television dispelling reports of his being captured by the rebels. “This will bring down some of the euphoria,” said Jakob. “However, we need to keep in mind that the fall of Tripoli was not expected for this past weekend, and if crude prices have been retreating in August, it was not because of positive expectations on the restart of crude oil exports from Libya but on negative expectations about oil demand.”

Jakob said, “Product prices are still at an elevated level that will not help product demand, and the downward revisions to oil demand projections are starting. Yesterday JP Morgan revised its oil demand growth expectation for 2012 by 500,000 b/d, and we still expect that the International Energy Agency, Paris, will have to make at least the same magnitude of revisions to its demand estimates. On the basis of those demand revisions, there is no need of Libyan crude oil to have a global stock build in 2012; Libyan crude oil would come on top of it. Goldman Sachs has delayed by 3 months their estimate of the Organization of Petroleum Exporting Countries running out of spare capacity due to Libya; we do not think that they have yet made the adjustment for upcoming oil demand revisions.”

Natural gas outlook

In other news, Raymond James analysts said, “As much as we would like to get bullish on natural gas, the facts tell us that we still have a gas-supply problem in the US that is likely to last at least through 2012. Despite year-over-year gas supply growth rates of around 5 bcfd this year, consensus expectations are that US gas supply growth should slow down sharply in 2012 to a full-year growth of about 2 bcfd year-over-year.”

They noted “many myths” as to why gas-supply growth rates “must” slow, including: “The natural rig count is…to fall off a cliff after leases expire; The decline curve treadmill will eventually catch up; The migration of rigs to liquids plays will lead to declines in natural gas production.”

Raymond James analysts said, “The gas bulls have been leaning fruitlessly on these reasons for the past several years. When one examines the evidence, none of these myths seem to hold water.”

They reported, “Our reality suggests that even if there is a modest decline in the gas rig count (reasonably, less than a 10% drop) in 2012, there are several drivers that should more than offset this reduction in drilling activity. In fact, we believe that gas supply growth may even accelerate over the next year due to the following:

• Drilling and completion efficiencies should continue to move higher.

• Associated gas from liquids rich oil plays should continue to increase.

• A hefty backlog of uncompleted wells still waiting behind pipe.

Raymond James analysts said, “To be conservative, we are modeling US gas supply growth in 2012 of only 4 bcfd. Unfortunately, this is roughly twice as high as consensus expectations and is likely to keep a lid on US natural gas prices in the sub-$4.50 range for the next year.”

Energy prices

The expiring September contract for benchmark US sweet, light crudes increased by $1.86 to $84.12/bbl Aug. 22 on the New York Mercantile Exchange. The October contract gained $2.01 to $84.42/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.86 to $84.12/bbl, in step with the September futures contract.

Heating oil for September delivery inched up 0.62¢ to $2.91/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month slipped 0.61¢ to $2.84/gal.

The September contract for natural gas dropped 5.1¢ to $3.89/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 3.1¢ to $3.98/MMbtu.

In London, the October IPE contract for North Sea Brent decreased 26¢ to $108.36/bbl.

Gas oil for September was down $2.50 to $915.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes rose 48¢ to $103.84/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

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...

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...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
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