MARKET WATCH: Economic concerns set back oil prices

Oil prices inched higher most of the day but retreated in late trading May 22, with crude down 1% in the New York market among festering financial problems in the Euro-zone.

However, natural gas gained almost 4% in that market on expectations warmer weather will boost demand for power generation. Analysts in the Houston office of Raymond James & Associates Inc. reported, “Taking the cue from the broader market and oil, energy stocks tumbled as the Oil Service Index and SIG Oil Exploration & Production Index dropped 0.6% and 0.9%, respectively.” Crude and gas futures were lower in early trading May 23.

Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, said Brent crude is still below the long-term trend support-line that started at the end of 2008 and remains vulnerable. “Brent crude needs to close above $108.80/bbl before it would appear to be on a better footing technically,” he said. “However, the euro weakness, or broad-based US dollar strength, is adding downward pressure to crude oil prices.”

De Wet said, “While the Brent crude oil market is fairly tight, as reflected in the backwardation, the product market is also weak. Inventory levels are at the higher end of the levels seen in the past 5 years while product demand…remains weak.”

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “Refining margins in the Mediterranean  have been under pressure of the strong physical premiums for the last 2 weeks, but those have started to correct lower as margins are starting to move back to negative territory. In northern Europe, the Forties benchmark [crude] is still very strong; the danger for the Brent market, however, is that the artificial economics of Forties [crude marketed] to South Korea starts to have too significant of an impact on the price-discovery value of the Brent contract, given that the shipments of Forties crude to South Korea have nothing to do with supply and demand factors.”

However, Jakob said, “The refining margins on the US Gulf Coast are very strong, and this is a trend that will not go away, since at market-price the US Midwest and increasingly the US Gulf Coast have access to the cheapest crude available and also to cheap energy through US natural gas prices. The Seaway pipeline reversal has started; it will take about 2 weeks for the crude to reach the US Gulf Coast, and the line-fill will be about 2.3 million bbl. As work progresses on the pump stations, the flows will increase from the initial 150,000 b/d. Hence the growth to 400,000 b/d of capacity by the end of the year should be gradual with the start of each new pump configuration, rather than come as a whole at the end of the year.”

US inventories

The Energy Information Administration reported May 23 commercial US crude inventories increased 900,000 bbl to 382.5 million bbl in the week ended May 18, well below Wall Street’s consensus for a gain of 1.7 million bbl. Gasoline stocks fell 3.3 million bbl to 201 million bbl in the same period, exceeding analysts’ expectations of a 700,000 bbl draw before the start of the summer driving season on the upcoming Memorial Day holiday. Both finished gasoline and blending components decreased last week. Distillate fuel inventories decreased 300,000 bbl to 119.5 million bbl, short of a consensus for a 500,000 bbl decline.

The import of crude into the US dropped 298,000 b/d to 8.6 million b/d last week. In the 4 weeks through May 18, crude imports averaged 8.8 million b/d, down 98,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 575,000 b/d while distillate fuel imports averaged 124,000 b/d.

The input of crude into US refineries was down 57,000 b/d to just under 15 million b/d last week with units operating at 88.1% of capacity. Gasoline production decreased to 8.9 million b/d. Distillate fuel production increased to 4.5 million b/d.

Energy prices

The expiring June contract for benchmark US light, sweet crudes lost 91¢ to $91.66/bbl May 22 on the New York Mercantile Exchange. The July contract fell $1.01 to $91.85/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., matched the front-month futures contract, down 91¢ to $91.66/bbl.

Heating oil for June delivery inched up 0.11¢ but closed essentially unchanged at a rounded $2.86/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.31¢ but also closed unchanged, at a rounded $2.94/gal.

The June natural gas contract climbed 9.8¢ to $2.71/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., slipped 0.7¢ to $2.59/MMbtu.

In London, the July IPE contract for North Sea Brent was down 40¢ to $108.41/bbl. Gas oil for June continued to increase, up $6.25 to $917.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 23¢ to $106.16/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Association presidents want more access in next 5-year OCS plan

02/09/2015 The presidents of three major US oil and gas trade associations urged the US Bureau of Ocean Energy Management to keep more of the US Outer Contine...

MARKET WATCH: NYMEX oil prices settle above $51/bbl

02/09/2015 Crude oil prices rose on the New York market Feb. 6 to settle above $51/bbl after the Baker Hughes Inc. weekly rig count showed a decline of 87 rig...

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Chinese regulators approve Sinopec’s plan for grassroots refinery

02/06/2015 China’s National Development and Reform Commission (NDRC) has approved Sinopec Beijing Yanshan Petrochemical Co. Ltd., a subsidiary of China Nation...

BOEM schedules public meetings about draft proposed 5-year OCS plan

02/06/2015 The US Bureau of Ocean Energy Management will hold the first of 20 public meetings in Washington on Feb. 9 to receive public comments on potential ...

Union strike ongoing at US refineries as negotiations continue

02/06/2015 A strike by union workers at nine US refining and petrochemical production plants remains under way as the United Steelworkers Union (USW) continue...

NCOC lets $1.8-billion pipeline contract for Kashagan field

02/06/2015 North Caspian Operating Co. (NCOC) has let a $1.8-billion engineering and construction contract to ERSAI Caspian Contractor LLC, a subsidiary of Sa...

AOPL releases 2015 safety performance and strategic planning report

02/06/2015 The Association of Oil Pipe Lines is committed to further improvements despite a 99.99% safe petroleum liquids delivery rate, AOPL Pres. and Chief ...

MARKET WATCH: NYMEX oil price bounces back up somewhat

02/06/2015 Crude oil prices on the New York market bounced up $2/bbl to settle slightly above $50/bbl Feb. 5. The positive momentum continued during early Jan...
White Papers

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

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

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