MARKET WATCH: Energy prices generally slipped lower

Energy prices generally dipped lower Aug. 12 ending a 2-day rebound, but US crude remained above $85/bbl in the New York market.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said oil remained “broadly flat” on Aug. 12 “on reasonable US retail sales data but sharply declining consumer confidence.”

Zhang said, “European oil products weakened across the barrel vs. crude, which pushed refining margins down by around $1/bbl. The term structure for Brent and WTI strengthened further on healthy physical demand for crude oil and increased hedging activity.”

He noted, “The recent fall in the oil price might provide some relief against economic headwinds. However, there is empirical evidence of an asymmetric response from economic growth to changes in the oil price. An increase in oil prices were often associated with economic recessions, but oil price decreases did not necessarily bring about corresponding economic booms.”

Meanwhile, analysts at the Centre for Global Energy Studies (CGES) in London said, “The sharp decline in US crude inventories and an increase in total petroleum products supplied in the week ended Aug. 7 helped support main benchmark crude prices last week, as did the limited improvement in the country’s jobless situation. A weaker dollar because of the Federal Reserve System’s decision to maintain ultra-low interest rates until mid-2013 also mitigated downward pressure on oil prices, said

But the most important development last week, they said, was the shift in market focus to the creditworthiness of France because of mounting fears of the eventual cost of bailing out the Eurozone’s weaker members. While recent riots in London and other European capitals have no connection with oil prices, they may be symptomatic of the bleak outlook for economic growth in the developed world and a deep-seated social malaise, CGES analysts said.

Political leadership lacking

“At the moment, policy makers seem incapable of dealing with the problems threatening global recovery, having precious few options left,” CGES analysts said. “In Europe, political opposition—particularly in Germany—to the bailouts for the Eurozone’s weaker members, as well as confusion about the European Central Bank’s role in the crisis, has meant growing uncertainty in the bond markets about the European Union’s ability to deal with its members’ debt problems. The latest country to come under intense scrutiny is France, demonstrated by the fact that the cost of credit default swaps—a form of insurance against default—for its 10-year bonds leapt to 175 basis points, compared with 55 for the US. Until Europe’s leaders alight on a long-term solution and concerns about the Euro-zone’s creditworthiness abate—so far there are few signs of this occurring—the prospect of a return to stable worldwide [economic] growth is minimal, and this will continue to be reflected in oil prices.”

US authorities’ response to an extremely weak economic recovery is of equal concern to CGES analysts and others. “[Fed Chairman] Ben Bernanke’s pledge that interest rates will remain at ultralow levels for the next 2 years is unprecedented, and it is quite possible that this will be followed by further quantitative easing (QE),” they said. While implications of a weakened US currency and increased inflationary pressures of the US administration’s “cheap-money policy” are serious, analysts said, this excess liquidity may not have the same affect on oil prices as in the past few years.

CGES analysts said, “This time around, the effects of the carry trade on oil prices—whereby market players borrow in US dollars and invest in perceived assets such as oil—are likely to be outweighed by the deteriorating prospects for economic growth. Any investors thus expecting a QE3 driven surge in the oil price may be disappointed. Of greater significance is whether the Organization of Petroleum Exporting Countries decides to limit any growth in its oil output, or even cut production, when faced with weakening global demand for its crude.”

They pointed out, “Although Saudi Arabia pledged it would raise production to meet any shortfall in supply over the summer months and has lifted its output by nearly 750,000 b/d since May, it has done little to make its export grades more attractive to refiners by increasing discounts against benchmark crudes. Indeed, the only region for which the relative price of Saudi Arabia’s Arab Light crude has fallen in recent months is Asia-Pacific, where the grade’s premium over the Dubai-Oman average has been cut from $2.15/bbl for June to 75¢/bbl for September. For US buyers, the September Arab Light premium over the Argus Sour Crude Index benchmark is the highest it has been all year, while European buyers have seen the discount to the IntercontinentalExchange’s Brent weighted average price narrow from more than $4/bbl for June to just $2.05/bbl for September.”

Energy prices

The September contract for benchmark US light, sweet crudes dipped 34¢ to $85.38/bbl Aug. 12 on the New York Mercantile Exchange. The October contract lost 35¢ to $85.69/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., remained in step with the front-month futures contract, down 34¢ to $85.38/bbl.

Heating oil for September delivery inched up 0.45¢ to $2.90/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 0.51¢ to $2.82/gal.

The September contract for natural gas dropped 4.8¢ to $4.06/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 5¢ to $4.13/MMbtu.

In London, the September IPE contract for North Sea Brent advanced 1¢ to $108.03/bbl. The new front-month September contract for gas oil escalated by $12.50 to $917/tonne.

OPEC offices in Vienna were closed Aug. 15, with no update of the average price for the group’s basket of 12 benchmark crudes.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Inhofe, Lankford say new BIA rules threaten Osage oil operations

07/10/2015 New US Bureau of Indian Affairs regulations that increase production expenses on tribal lands could put the Osage Nation out of business, Oklahoma’...

House panel’s crude export ban hearing weighs urgency against caution

07/10/2015 A US House Energy and Commerce subcommittee hearing on legislation to repeal the ban on exporting US-produced crude oil quickly broke along party l...

Chevron Phillips Chemical makes executive appointments

07/10/2015

Chevron Phillips Chemical Co. LLC has made several executive appointments, all effective Aug. 1.

Twelve workers killed in Nigeria pipeline explosion

07/10/2015 Eni SPA reported that an explosion occurred July 9 at the repair site for the Tebidaba-Clough Creek oil pipeline in Nigeria’s onshore Niger Delta.

Gov. Tomblin forms West Virginia oil, gas safety commission

07/10/2015 West Virginia Gov. Earl Ray Tomblin (D) established the oil and gas safety commission he announced in his 2015 State of the State address. The grou...

MARKET WATCH: NYMEX, Brent crude oil prices rebound more than $1/bbl

07/10/2015 Prices for US light, sweet crude oil and Brent crude each rebounded by more than $1/bbl on their respective markets July 9, and analysts attributed...

Transco seeks FERC approval for New York Bay Expansion project

07/09/2015 Transcontinental Gas Pipe Line Co. LLC (Transco), a wholly owned subsidiary of Williams Partners LP, has filed an application with the US Federal E...

House Oversight panel subpoenas Kerry for Keystone XL documents

07/09/2015 The US House Oversight and Government Reform Committee issued a subpoena to US Sec. of State John F. Kerry for reports, recommendations, letters, a...

MARKET WATCH: NYMEX crude oil prices drop for fifth consecutive trading session

07/09/2015 US light, sweet crude oil prices settled slightly lower on the New York market July 8 for the fifth consecutive trading session, and analysts attri...
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