MARKET WATCH: WTI rises, Brent declines in mixed market

The front-month contract for benchmark US crude recovered a modest 0.4% Apr. 24 in the New York market, but natural gas dropped 1.6% with the return of warmer-than-normal weather in the US Northeast.

“The oil market was mixed, with West Texas Intermediate making small gains while Brent declined further,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Better-than-expected sovereign bond auctions form the Euro-zone fueled a relief rally in European equities, and US equity was also supported by good corporate earnings. Oil products were soft in general as the market anticipates refineries to ramp up run rates in the coming months.”

Time spreads in Brent were weak with apparently “plenty of prompt physical cargoes yet to be lifted,” Zhang said. “The news of production issues at the Forties field, which tended to drive a big rally in the Brent spread early on this year, has so far had a very muted effect on the market. In addition, dated Brent remained in cantango, although the cantango structure has flattened slightly in the past couple of days.”

The euro and the European main equity market continued to recover in early trading Apr. 25 after sharp drops Apr. 23. “The reaction of the oil market during the past 2 days was relatively mild during both the [Apr. 23] sell-off and the [Apr. 24] recovery,” Zhang said. “It appears that oil market fundamentals have been playing a bigger role lately as the growth in speculative length in the oil market is leveling off.”

Olivier Jakob at Petromatrix in Zug, Switzerland, noted the Brent premium to WTI lost on Apr. 24 “all the gains that it made” in the previous session. “The reformulated stock for oxygenate blending (RBOB) gasoline crack also lost some of the [earlier] gains but not all of it,” he reported. “The refining margins in the Atlantic Basin have improved over the last few weeks, being helped as well by cash differentials in crude oil that had to go lower in order to push barrels into refineries.”

Jakob said, “On Apr. 23, it was Sunoco Inc. that was announcing that it was pushing forward its proposed [Philadelphia refinery] closing date by one month from July to August; and yesterday it was the Petronor Bilbao refinery that was announcing the restart of its second distillation tower and associated reformer due to better margins (Petronor had shut those units at the start of January). With refinery units that were idled due to poor margins starting to be put back into service while the high prices are still at risk for end-user demand, we want to remain cautious on the long side of the gasoline relative values.”

Sunoco is in exclusive discussions with the Carlyle Group regarding a potential joint venture involving Sunoco's 330,000 b/d refinery in Philadelphia. However, Sunoco officials said if a transaction is not completed, the company will proceed to shut down the refinery’s main processing units in August.

The Petronor SA subsidiary of Repsol YPF SA operates the Bilbao refinery in Spain.

US inventories

The Energy Information Administration said Apr. 25 commercial US crude inventories escalated by 4 million bbl to 373 million bbl in the week ended Apr. 20, more than Wall Street’s consensus for a 2.8 million bbl increase. Gasoline inventories fell 2.2 million bbl to 211.7 million bbl in the same period, exceeding analyst’s expectations of a 1.5 million bbl decline. Both finished gasoline and blending components decreased last week. Distillate fuel inventories dropped 3.1 million bbl to 125.9 million bbl; the market anticipated a gain of 500,000 bbl.

The American Petroleum Institute earlier reported US crude stocks dropped 985,000 bbl to 368.4 million bbl last week. It reported gasoline and distillate fuel inventories fell 3.6 million bbl each to 216.8 million bbl and 128.9 million bbl, respectively.

Imports of crude into the US increased 48,000 b/d to 8.8 million b/d last week, EIA officials reported. In the 4 weeks through Apr. 20, US crude imports averaged 8.9 million b/d, an increase of 235,000 b/d above the comparable period last year. Gasoline imports last week averaged 620,000 b/d while distillate fuel imports averaged 107,000 b/d.

EIA said the input of crude into US refineries increased 23,000 b/d to 14.5 million b/d last week, with units operating at 84.7% of capacity. However, both gasoline and distillate fuel production decreased to 8.8 million b/d and 4.2 million b/d, respectively.

Energy prices

The June contract for benchmark US light, sweet crudes regained 44¢ to $103.55/bbl Apr. 24 on the New York Mercantile Exchange. The July contract took back 41¢ to $103.96/bbl. On the US spot market, WTI at Cushing, Okla., was up 5¢ to $103.16/bbl.

Heating oil for May delivery, however, retreated 1.03¢ to $3.13/gal on NYMEX. RBOB for the same month lost 2.8¢ to $3.16/gal.

The May natural gas contract fell 3.2¢ to $1.98/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., continued climbing, up 6¢ to $1.98/MMbtu.

In London, the June IPE contract for North Sea Brent continued to slip, down 55¢ to $118.16/bbl. Gas oil for May rose $6.25 to $996/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 30¢ to $115.80/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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