MARKET WATCH: Crude oil price declines for fifth straight session

Crude oil prices continued falling for the fifth consecutive session, with the front-month contract down 1% May 8 in a mixed New York futures market amid suggestions Saudi Arabia may release more oil to help reduce prices.

“On the other hand, expectations for strong electric demand continuing to drive up demand for natural gas sent that commodity up 2.4%,” said analysts in the Houston office of Raymond James & Associates Inc.

Crude sold as low as $95.52/bbl prior to “a decent rally” near the close of the New York market that, for the second consecutive session, recouped much—but not all—of the day’s earlier loss. “Oil products were particularly resilient,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Time spreads were soft but made a decent recovery from an intraday sell-off.”

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “Crude oil prices were again under heavy pressure, but the support at the approach of $110/bbl on Brent and $95/bbl [for West Texas Intermediate] continues to be well-defended.” In the first two New York sessions this week, he said, “The intraday patterns were very similar in magnitude and timing.”

Jakob said, “The fate of Europe continues to be the main macro input, and we are living just another episode of the same story. The problem of Europe is relatively simple: Either the South has to pay for the North, or the North has to pay for the South; and given that Europe is not a nation, it is very difficult to force one European region to sacrifice itself for the other. The euro-dollar [valuation] remains under pressure, but with some strong interest to maintain it above 1.30 to prevent a risk-off in equities in front of the Facebook initial public offering.”

US inventories

The Energy Information Administration said commercial US inventories of crude increased 3.7 million bbl to 379.5 million bbl in the week ended May 4, exceeding Wall Street’s consensus for a 2 million bbl build. Gasoline stocks dropped 2.6 million bbl to 207.1 million bbl. Analysts were expecting an 800,000 bbl decline. Both finished gasoline and blending components decreased last week. Distillate fuel inventories fell 3.3 million bbl to 120.8 million bbl, far exceeding the market’s outlook for a 100,000 bbl decline.

Imports of crude into the US grew by 145,000 b/d to 9 million b/d last week. In the 4 weeks through May 4, US imports of crude averaged 8.8 million b/d, just 28,000 b/d more than in the comparable period a year ago. Gasoline imports last week averaged 607,000 b/d, while distillate fuel imports averaged 47,000 b/d.

The input of crude into US refineries increased 35,000 b/d to 14.7 million b/d last week with units operating at 86.4% of capacity. Gasoline production increased to 9.1 million b/d, and distillate fuel production increased to 4.4 million b/d.

Energy prices

The June contract for benchmark US light, sweet crudes dropped 93¢ to $97.01/bbl on the New York Mercantile Exchange. The July contract lost 94¢ to $97.37/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 93¢ to $97.01/bbl.

Heating oil for June delivery inched up 0.87¢ to $2.99/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 2.03¢ and also closed at a rounded $2.99/gal.

The June natural gas contract advanced 5.7¢ to $2.39/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., decreased 2.8¢ to $2.27/MMbtu.

In London, the June IPE contract for North Sea Brent lost 43¢ to $112.73/bbl. Gas oil for May dropped $6.25 to $945.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was down 54¢ to $109.58/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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