MARKET WATCH: Natural gas, crude prices continue falling in US market

Natural gas prices continued to drop, down 5% Feb. 1 in the New York futures market on reports of record-high supply levels and milder weather, while crude declined 1% to less than $98/bbl following another unsuccessful run at the $100/bbl barrier.

Both bucked a rally in the equity market where Standard & Poor’s 500 Index was up 1% as investors breathed sighs of relief on reports that an “imminent” agreement between Greece and its creditors is still imminent.

“Oil prices were choppy yesterday, swung by macroeconomic data releases and the weekly US oil inventory report [by the Department of Energy’s Energy Information Administration],” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. Product cracks—particularly for distillates—widened further following sizable inventory builds of US refined products stocks. Term structures in West Texas Intermediate and North Sea Brent crude diverged as WTI’s structure weakened slightly and Brent’s structure rallied.

Analysts in the Houston office of Raymond James & Associates Inc. reported Feb. 2 the price spread between WTI and Brent “has widened to $15/bbl this morning, a level not seen since November,” as crude storage at Cushing, Okla., “ begins to build in the midst of spring refinery maintenance season.”

Olivier Jakob at Petromatrix in Zug, Switzerland said, “Canadian imports into [the DOE’s Petroleum Administration for Defense District] PADD 2 [covering the Midwest] remain very high and stocks of crude oil in Cushing have started to rebuild. There is still a long way to go until the stocks in Cushing reach fill-capacity, but with the delay in the Seaway pipeline reversal and the seasonal drop in refinery runs during the spring, the stocks in Cushing should continue to build,” said Olivier Jakob at Petromatrix in Zug, Switzerland.

US inventories

EIA reported Feb. 2 the withdrawal of 132 bcf of natural gas from US underground storage in the week ended Jan. 27. That was above the Wall Street consensus for a 129 bcf withdrawal, leaving 2.97 tcf of working gas in storage. That’s 586 bcf higher than last year at this time, and 601 bcf above the 5-year average.

EIA earlier reported commercial US crude inventories jumped 4.2 million bbl to 338.9 million bbl in the same week, exceeding Wall Street’s consensus for 2.6 million bbl build. Gasoline stocks rose 3 million bbl to 230.1 million bbl, far above analysts’ expectations of a 500,000 bbl increase. Both finished gasoline and blending components increased. Distillate fuel inventories dipped 100,000 bbl to 145.4 million bbl, less than the 1.4 million bbl decrease the market expected. Total commercial petroleum inventories increased 8.4 million bbl last week vs. Wall Street projections of a 1.7 million bbl gain (OGJ Online, Feb. 1, 2012).

The oil inventories update was bearish “as a higher-than-expected build in gasoline was compounded by a build in crude, partly offset by a small draw in distillates,” said Raymond James analysts. “A jump in imports didn't help, as warm winter temperatures and weak consumption patterns continue to weigh on demand. As a result, gasoline demand fell 1.6% week-over-week and was down 7.3% vs. the same period last year while distillate demand dropped 3.9% week-over-week, down 1.7% vs. the same period last year. At the end of the week, total days of petroleum supply stood at almost 50 days, up 1 day year-over-year and well above the 5-year average of 43 days. At Cushing, inventories rose 1.5 million bbl to 30.1 million bbl, the second weekly build in a row, pressuring WTI pricing relative to Brent.”

Earlier this week, the DOE announced a “huge” revision adding 23 million bbl to its monthly stock report for November. At the time, Jakob warned of the risk that “some larger-than-expected stock builds” might appear in subsequent weekly reports “as the DOE needs to gradually align the current stocks to the November baseline.” The latest report “showed a total stock build of 8.4 million bbl, including [an increase of] 7.8 million bbl in the main crude plus clean petroleum product category. In the first 4 weeks of this year, the US has built 21.7 million bbl in that main…category, or a daily stock build of 780,000 b/d.” He said, “A stock build in January is as seasonal and normal as a stock draw in December, but that still leaves the main total US stocks at a comfortable level.”

DOE’s implied demand for gasoline “is extremely low,” said Jakob. Some of that demand loss may stem from the November revision, “but it cannot be the whole explanation,” Jakob said. The latest MasterCard Spending Pulse report on US retail gasoline sales also indicated gasoline sales at the pump are severely lower than a year ago. “If those implied numbers are anywhere close to reality, then the demand destruction of 2008 was nothing compared to the demand destruction of 2011-12,” said Jackson.

“In 2011, to offset the loss of domestic demand the US refineries have increased exports of gasoline to Latin America, making the US join Singapore as the world’s largest exporter of gasoline; but if the US real gasoline consumption continues on this trend, the US Gulf Coast refineries will need to export even more gasoline and probably force more other refineries to shut down on either side of the Atlantic. The stocks of gasoline remain very comfortable and the days-of-cover in gasoline are at the highest level since 1995,” he said.

Distillates stocks were stable last week, still below the high levels of 2010-11. “But there has been no winter so far in the US, and that is not expected to change for the next 2 weeks,” said Jakob. “US refineries are running too hard for local consumption, but the margins are supporting high utilization rates and that should continue to translate into more stock builds.”

The US Gulf Coast registered 3.3 million bbl stock build last week after the seasonal drawdown in December. “Imports from Saudi Arabia on the 4-week average are at a solid 1.55 million b/d, which is 41% higher than a year ago and the highest level since July 2008,” Jakob reported. “Imports from Nigeria, however, are 56% lower than a year ago. As the US East Coast refineries are shutting down to the benefit of the US Gulf Coast refineries, Saudi Arabia is taking the US market share of Nigeria. Nigeria will continue to have to look for other markets, especially now that Libya is getting closer to pre-war levels. The US administration is rejecting a vote for the extension of the Keystone Pipeline [that would transport crude from Canada’s oil sands to the US Gulf Coast] at the same time that the US is reestablishing its dependency on crude oil from Saudi Arabia,” Jakob said.

Energy prices

The March contract for benchmark US sweet, light crudes fell 87/¢ Feb. 1 to $97.61/bbl on the New York Mercantile Exchange. The April contract dropped 86¢ to $97.99/bbl. On the US spot market, WTI at Cushing was down 87¢ to $97.61/bbl.

The new front-month March heating oil dipped 0.54¢ to $3.05/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.13¢, but its rounded closing price was essentially unchanged at $2.89/gal.

The March natural gas contract dropped 12.1¢ to $2.38/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 16.7¢ to $2.33/MMbtu.

In London, the March IPE contract for North Sea Brent increased 58¢ to $111.56/bbl. Gas oil for February gained $6 to $955.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 59¢ to $110.62/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

 

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

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