MARKET WATCH: Stronger consumer data lift energy prices

Energy prices generally posted small gains in reaction to strong consumer data Mar. 13, recovering some of the loss from the previous session. The front-month natural gas contract was up 1% in the New York market.

“Oil was boosted by the slightly more positive outlook on the US economy from the US Federal Reserve,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “The market was also lifted by the buoyant equity market in the US and Europe, although the bullishness in oil was partially offset by a stronger US dollar.”

Petroleum products slightly outperformed crude as the American Petroleum Institute reported sizeable draws on product inventories and a build in crude stocks. “As we expected, time spreads at the front-end of Brent curve continued to weaken due to poor refining margins in Europe and the upcoming spring maintenance season,” Zhang said.

In its latest monthly oil market report, Paris-based International Energy Agency kept its demand projection unchanged for 2012 at 800,000 b/d above the 2011 level. “However, the focus remains on the supply side of the market, as the agency thinks that Iranian exports could fall by 1 million b/d from July, and spare capacity from Saudi Arabia dropped to 1.9 million b/d in February,” said Zhang. “Non-OPEC production during the first quarter also was disappointing. As tight supply drove crude prices up, product prices have been lagging, which saw on average margins for European refineries halved in February from January. This morning it was reported that Total SA has partially shut down its refinery at Gonfreville in Normandy, France, due to poor refining margins.”

The Euro remains under pressure. “The strength in the Dollar Index and Brent at $126/bbl means that in Europe new all-time record high prices at the pump will be printed,” said Olivier Jakob at Petromatrix in Zug, Switzerland. “The same goes for China, which according to its price mechanism formula should soon go through another price increase at the pump, also to a new all-time record high. To reassure those customers, the Saudi oil minister made statements again today that Saudi Arabia stands ready to supply more oil to the market but not now because supply is ample and because the current prices are the result of excessive speculation. Exactly the same thing was said by Saudi Arabia at the same time of the year in 2008. When Saudi Arabia decided to act in 2008, it was already too late for the world economy.”

US inventories

The Energy Information Administration reported Mar. 14 commercial US inventories of crude increased 1.8 million bbl to 347.5 million bbl in the week ended Mar. 9. Gasoline stocks dropped 1.4 million bbl to 228.1 million bbl. Finished gasoline inventories decreased while blending components remained unchanged. Distillate fuel inventories fell 4.7 million bbl to 134.8 million bbl.

Imports of crude into the US inched up 4,000 b/d to 8.7 million b/d last week. In the 4 weeks through Mar. 9, crude imports into the US averaged 8.9 million b/d, up 653,000 b/d compared with the same period a year ago. Gasoline imports last week averaged 532,000 b/d. Distillate fuel imports averaged 141,000 b/d.

The input of crude into US refineries declined by 126,000 b/d to 14.5 million b/d last week with units operating at 82.7% of capacity. Gasoline production increased to 8.8 million b/d, but distillate fuel production decreased to 4.1 million b/d.

Energy prices

The April contract for benchmark US light, sweet crudes increased 37¢ to $106.71/bbl Mar. 13 on the New York Mercantile Exchange. The May contract gained 40¢ to $107.24/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 37¢ to $106.71/bbl.

Heating oil for April delivery increased 2.83¢ to $3.27/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 3.16¢ to $3.35/gal.

The April natural gas contract was up 3¢ to $2.30/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 1.5¢ to $2.15/MMbtu.

In London, the April IPE contract for North Sea Brent climbed 88¢ to $126.22/bbl. The new front-month April gas oil contract escalated by $8.25 to $1,036.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 71¢ to $124.59/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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