MARKET WATCH: Crude oil, natural gas prices decline in New York market

The front-month crude oil futures contract closed marginally lower Oct. 12, ending its latest rally in the New York market although the Standard & Poor’s 500 index rose for the sixth time in seven sessions. Natural gas futures also dropped, falling 3.6% with the forecast of milder weather and an expected build of gas in storage.

Crude prices initially climbed because of a weaker US dollar but failed to maintain their gains by the market’s closing bell. Crude oil has traded in conjunction with activity in the S&P 500 for most of this year.

“European and US Gulf Coast refining margins fell sharply, while the Singapore margin held up relatively well even though Shell’s refinery in Singapore is now partially back in operation,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “The backwardation in Brent remains very steep amid low inventories. The West Texas Intermediate structure weakened slightly as the American Petroleum Institute reported an increase in Cushing, Okla., crude inventories for the first time in 7 weeks.”

API reported US crude stocks fell 3.8 million bbl to 340.4 million bbl in the week ended Oct. 7. It said gasoline inventories declined 1.2 million bbl to 211.2 million bbl, while distillate stocks dropped 3.1 million bbl to 151.9 million bbl.

On Oct. 13, however, the Energy Information Administration under the Department of Energy said commercial inventory of US crude increased 1.3 million bbl to 337.6 million bbl last week. Gasoline stocks fell 4.1 million bbl with decreases in both finished gasoline and blending components. Distillate fuel inventories dropped 2.9 million bbl to 154 million bbl, said EIA officials in a report delayed this week by the Columbus Day holiday in the US.

EIA said imports of crude oil into the US increased 386,000 b/d to 9.1 million b/d last week. In the 4 weeks through Oct. 7 crude imports averaged 9 million b/d, an increase of 115,000 b/d from the comparable period in 2010. Last week gasoline imports averaged 418,000 b/d while distillate imports averaged 117,000 b/d.

The input of crude into US refineries dropped 563,000 b/d to 14.5 million b/d last week, EIA said, with units operating at 84.2% of capacity. Gasoline production declined to 8.9 million b/d last week while distillate fuel production decreased to 4.4 million b/d.

EIA also reported the injection of 112 bcf of natural gas into US underground storage last week, up from the Wall Street consensus of 102 bcf input. That raised working gas in storage above 3.5 tcf. That’s 56 bcf less gas in storage than in the similar 2010 period but 68 bcf above the 5-year average.

Olivier Jakob at Petromatrix in Zug, Switzerland, noted API’s reported drawdown of crude stocks included a 2.4 million bbl draw in the “discounted” West Coast district and a 1.3 million bbl reduction in Gulf Coast inventories of crude. “The API is still 5.2 million bbl higher than the DOE on Gulf Coast crude oil stocks; hence there is a bearish API-DOE convergence risk…for crude oil.” On the other hand, he said, “The API-DOE convergence risk is bullish on products. The API is particularly lower on distillates.”

Zhang said, “The rather tight physical market since August has pushed the Brent curve into very steep backwardation. With the refining margins collapsing again in Europe, refineries are likely to cut runs and hold back from crude purchases. Although European refiners are running on very low inventories, the tight physical market is likely to curb any incentives to rebuild inventories.”

Jakob said, “The Brent November [contract] expires tomorrow, and the main trading action for the last 2 days has been a convergence trade on the front Brent spread and the Brent premium to WTI. The Dow Jones-UBS Commodity Index shifting some of its crude allocation from WTI to Brent in January will provide some support for the Brent premium to WTI, but in our opinion it will then also provide a good entry point to short that spread.” He said, “We expect that the current financial demand for Brent futures in commodity indices will be followed in the first half of 2012 by a structural change in the Atlantic Basin sweet crude oil physical supply and demand (due to loss of the East Coast refiners and Libya coming back faster than expected). Bottom line: we expect that the Brent premium to WTI will peak through the DJ-UBS Commodity Index shift.”

In other news, China’s latest trade data released overnight showed its crude imports down 700,000 b/d from a year ago. “September 2010 was a peak number followed by a very low number in October, hence October 2011 will show a big increase year-on-year,” Jakob predicted. “There is some base effect in the September comparison, but that will not change the fact that crude oil imports in China have been very steady rather than surging this year. On a year-to-date basis, Chinese crude oil imports are only 200,000 b/d higher than a year ago and are down 100,000 b/d for the third quarter 2011 compared to the third quarter 2010. Based on factual numbers, it is very hard to blame this year the Chinese for the gasoline prices paid at the pump in New York.”

Zhang said, “Year-to-date China oil imports increased by 4% or equivalent to approximately 150,000 b/d. Meanwhile, China’s domestic crude production has grown by about 2.5% so far this year or equivalent to less than 100,000 b/d. Even if a sharp seasonal demand increase materializes in the fourth quarter, it appears that China’s oil demand growth might significantly undershoot projections of 500,000 b/d year-on-year growth in 2011 made by the major agencies.”

Energy prices

The November contract for benchmark US sweet, light crudes declined 24¢ to $85.57/bbl Oct. 12 on the New York Mercantile Exchange. The December contract retreated 23¢ to $85.78/bbl. On the US spot market, WTI at Cushing was down 24¢ to $85.57/bbl.

Heating oil for November delivery increased 3.06¢ to $2.93/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month was up 0.11¢ for the day, yet closed essentially unchanged at a rounded $2.75/gal.

The November contract for natural gas fell 12.7¢ to $3.49/MMbtu, wiping out most of its gains from the previous two sessions on NYMEX. On the US spot market, however, gas at Henry Hub, La., continued climbing, up 1.9¢ to $3.55/MMbtu.

In London, the November IPE contract for North Sea Brent gained 63¢ to $111.36/bbl. Gas oil for October increased $6.50 to $918.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes jumped by $2.07 to $107.68/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Aussie, Timor-Leste regulators terminate Timor Gap permit

07/17/2015 Regulators in Australia and Timor-Leste have now formally terminated Timor Gap production-sharing contract JPDA 06-103, which leaves Australian com...

Nexen pipeline leaks 5,000 cu m of emulsion in Alberta

07/17/2015 Alberta Energy Regulator (AER) reported that a Nexen Energy ULC pipeline has leaked 5,000 cu m of emulsion—a mixture of bitumen, produced water, an...

MARKET WATCH: NYMEX crude oil prices drops below $51/bbl

07/17/2015 Light, sweet crude oil prices for August delivery dropped modestly to settle at just under $51/bbl on the New York July 16, but Brent crude oil Aug...

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...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

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
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


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


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