MARKET WATCH: Crude oil prices rebound in optimistic market

Oil prices rose with the front-month crude contract closing above $88/bbl Oct 19 in the New York market, up 2.3% on an optimistic report of accord in the European debt mess as traders shrugged off disappointing Chinese growth data and expectations of a rise in US oil inventories.

But even as a cold front lowered temperatures in several states, the near-month natural gas contract dropped 2.4% in anticipation of a bearish report on US inventory.

“The increased optimism in [both equity and commodity] markets was sparked by a report that France and Germany had agreed on a €2 trillion boost to the European Financial Stability Fund,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “The figure of €2 trillion was soon denied by European Union officials, but the confidence that it engendered in markets appears to have remained. The US and Asian equity markets ended the day up, while European stocks are trading in the black,” he reported early Oct. 19.

Later, however, analysts in the Houston office of Raymond James & Associates Inc. said, “Moody's Investors Service two-notch downgrade [overnight] of Spanish government debt is arresting yesterday's momentum, as Standard & Poor’s futures are in the red [in early trading in New York].  Crude futures are following suit while gas futures are green.”

Ground reported, “Equity futures are mixed, which raises doubts about the sustainability of the current appetite for risk. This is unsurprising given that yesterday’s poor US corporate earnings results (Goldman Sachs, Bank of America, and Apple) and Moody’s double-notch downgrade of Spanish sovereign debt provide little cause for optimism. Consequently, we expect oil markets to lose momentum today.”

He said, “Another possible drag on oil markets, and commodities in general, is yesterday’s decision by the Commodity Futures Trading Commission (CFTC ) to accept a provisions of the Frank-Dodd Act that would allow the commission to limit speculative trading in commodities. Essentially, the rule will limit trader positions to 25% of deliverable supply in the month nearest to delivery. Cash-settled natural gas contracts will, however, be subject to different provisions.”

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “The flat price of crude oil continues to trade an extreme correlation to the S&P 500 index and to the euro-dollar [valuations].” As for the CFTC vote, he said, “We are not sure that position limits will have an influence on the correlation trades.

He said, “While the flat price of crude oil does its thing with the S&P 500, the time spread structure is weakening across the board apart from West Texas Intermediate.” 

Jakob said, “If a ‘Cushing glut’ is often used as an argument to justify the Brent premium to WTI, the facts are that stocks in Cushing, Okla., have not been this tight since October 2007. Given that the storage capacity in Cushing has increased over the years, we measure the tightness in Cushing as the differential between current stock levels and the highest stocks seen over a year. On that basis, there is about 11 million bbl of empty storage capacity in Cushing, a level only briefly surpassed in the fourth quarter of 2007. Back then the WTI November-December spread expired in a backwardation of $1.60/bbl compared to the current contango of about 20¢/bbl. We expect the stocks in Cushing to rebuild during the fourth quarter, but the immediate stock situation allows in our opinion an expiry squeeze if anyone has such an agenda. That will be a risk going into this expiry.”

The November crude futures contract is to expire with the close of the New York market’s regular session Oct. 20.

“Meanwhile in Europe, the backwardation in Brent is easing while the Brent premium to WTI loses another $1/bbl. The Forties differentials continue to come off and are at the weakest levels since early August. Back then the backwardation in Brent was below 50¢/bbl and the Brent premium to WTI closer to $20/bbl than to $25/bbl,” said Jakob

He said, “The ICE Gasoil backwardation is also easing. The German commercial stocks of distillates are at multi-year highs, the German consumer stocks are at normal average levels for the season, the retail prices are a record high. Winter remains a weather market, but with the above inputs, we remain cautious on the expected strength of German winter demand.”

Meanwhile, ministers and representatives from the 28 member countries of the International Energy Agency apparently applied more jawbone than muscle to energy issues during their annual ministerial meeting Oct. 18-19 in Paris. At the end of that meeting, they resolved to:

• Continue efforts to assess and ensure energy security.

• Promote diversity of supply by the safe and sustainable development of natural resources, new transit routes, renewable energy, and low carbon energy technologies.

• Encourage market openness, flexibility, and transparency.

• Encourage innovative, cost-effective ways to provide secure energy supplies while reducing greenhouse gas emissions.

• Strengthen cooperation with member and partner countries, the private sector, and international bodies.

Statements and conclusions published at the close of that meeting did not say how they plan to accomplish those goals.

US inventories

The Energy Information Administration reported Oct. 19 commercial US crude inventories fell 4.7 million bbl to 332.9 million bbl in the week ended Oct. 14, opposite the Wall Street consensus for a 2 million bbl increase. Gasoline stocks dropped 3.3 million bbl to 206.3 million bbl in the same period, exceeding analysts’ expectations of a 1.5 million bbl decline. Finished gasoline inventories increased while blending components inventories decreased. Distillate fuel inventories were down 4.3 million bbl to 149.7, also exceeding expectations for a 1.5 million bbl draw.

Imports of crude into the US fell 1.2 million b/d to 7.9 million b/d last week. For the 4 weeks through Oct. 14 crude imports averaged 8.9 million b/d, an 187,000 b/d increase from the comparable period in 2010. Gasoline imports last week averaged 458,000 b/d, while imports of distillate fuel averaged 107,000b/d.

The input of crude into US refineries declined 134,000 b/d to 14.4 million b/d last week with units operating at 83.1% of capacity. However, gasoline production increased to 9.3 million b/d. Distillate fuel production decreased to 4.4 million b/d.

Energy prices

The November contract for benchmark US light, sweet crudes rebound by $1.96 to $88.34/bbl Oct. 18 on the New York Mercantile Exchange. The December contract gained $1.91 to $88.53/bbl. On the US spot market, WTI at Cushing was up $1.96 to $88.34/bbl.

Heating oil for November delivery increased 1.41¢ to $3.03/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month inched up 0.4¢ to $2.75/gal.

The November contract for natural gas continued falling, down 13.5¢ to $3.55/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 9¢ to $3.61/MMbtu.

In London, the December IPE contract for North Sea Brent increased 99¢ to $111.15/bbl. Gas oil for November continued to drop, down $11.25 to $936.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $2.19 to $107.94/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

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...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When 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



On Demand

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


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


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