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MARKET WATCH: Crude prices climb in mixed markets

The price for front-month crude climbed 3.8% May 1 in the New York market, boosted by an equity market rally that saw the Dow Jones Industrial Average hit a 4-year high.

“Natural gas finished up 3.8% on news that Talisman Energy Inc. plans to cut dry gas spending,” said analysts in the Houston office of Raymond James & Associates Inc.

However, energy and stock prices were down in early trading May 2 with the DJIA falling 78 points in the first hour on disappointing reports of US employment and Euro-zone’s economic problems.

James Zhang at Standard New York Securities Inc., the Standard Bank Group reported, “The oil market had a mixed day yesterday in thin trading volume.” He said, “Gasoline and heating oil actually fell, which suggests that the rally in West Texas Intermediate was most probably fuelled by people aggressively buying the WTI-Brent spread. This was also reflected by a strong rally in WTI time spreads across the whole forward curve. In contrast, Brent time spreads were little changed as the physical market appeared abundantly supplied.”

The Purchasing Manager Index survey for the Euro-zone released May 2 “added more gloom to the region’s economic prospects,” Zhang said. “The survey fell to 45.9, significantly below the 50 threshold level separating growth and contraction. The two main economic engines in the region, Germany and France, both had below-expectation readings. Euro-zone’s unemployment rate also rose, to 10.9%.”

US inventories

The Energy Information Administration said May 2 commercial US crude inventories increased 2.8 million bbl to 375.9 million bbl in the week ended Apr. 27. That was up from Wall Street’s consensus for a 2.5 million bbl gain. Gasoline stocks fell 2 million bbl to 209.7 million bbl, exceeding the Street’s expectation of a 1.5 million bbl decline. Both finished gasoline and blending components were down last week. Distillate fuel inventories dropped 1.9 million bbl to 124 million bbl. Analysts expected a smaller loss of 400,000 bbl.

The American Petroleum Institute earlier reported a 2 million bbl increase in crude stocks to 370.4 million bbl in that same period. It said gasoline inventories fell 3.9 million bbl to 212.9 million bbl, while distillates were down 4.2 million bbl to 124.6 million bbl last week.

EIA reported crude imports into the US increased 56,000 b/d to 8.8 million b/d last week. In the 4 weeks through Apr. 27, US crude imports averaged 8.7 million b/d, up 15,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 774,000 b/d while distillate fuel imports averaged 91,000 b/d.

The input of crude into US refineries increased 230,000 b/d to 14.7 million b/d last week with units operating at 86% of capacity. Gasoline production was virtually unchanged at 8.8 million b/d while distillate fuel production decreased to 4.1 million b/d.

Energy prices

The June contract for benchmark US light, sweet crudes gained $1.29 to $106.16/bbl May 1 on the New York Mercantile Exchange. The July contract increased $1.24 to $106.50/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.29 to $106.16/bbl.

However, the new front-month June contract for heating oil dipped 0.71¢ to $3.18/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 2.75¢ to $3.10/gal.

The June natural gas contract continued to climb, up 8.6¢ to $2.37/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated 17.8¢ to $2.29/MMbtu.

In London, the June IPE contract for North Sea Brent rose 19¢ to $119.66/bbl. Gas oil for May increased $6.25 to $1,013.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes decreased 12¢ to $117.08/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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