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

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...

AGL Energy to scale back upstream gas operations

07/06/2015

Gas retailer AGL Energy Ltd., Sydney, says it will exit the oil business and massively scaling back its upstream gas operations.

Macondo settlement seen ‘positive’ for BP

07/06/2015 BP Exploration & Production Inc.’s recent agreement to settle federal and state claims related to the 2010 Macondo blowout and spill improves t...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

Linn Energy, Quantum complete AcqCo deal

07/06/2015 Linn Energy LLC, affiliate LinnCo LLC, and Quantum Energy Partners have signed definitive agreements to fund the acquisition and development of oil...

MARKET WATCH: NYMEX oil prices fall on rise in US rig count

07/06/2015 US light, sweet crude oil prices edged down going into the July 4 holiday weekend on the New York market after Baker Hughes Inc. reported July 2 th...
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