MARKET WATCH: NY market pattern continues; gas prices up, oil down

The front-month contract for benchmark US crude continued a six-session losing streak in the New York market while natural gas maintained its rally, up 3% on May 9.

“Oil products were strong, propped up by a larger-than-expected inventory draw in the US. Time spreads in both West Texas Intermediate and Brent were also firmer, as supply from the North Sea experienced further disruptions from the Buzzard field, the largest field feeding into the Forties pipeline,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group.

“Crude oil futures have followed about the same patterns for the last 3 days: early weakness on macro fears, to find support on the key lines and then rally back for about unchanged levels in the open session, said Olivier Jakob at Petromatrix in Zug, Switzerland. “The flat price correction over the past 20 days has been severe, and there is some normalcy for crude oil to stabilize after such a move and in front of such important support lines.” The Brent price premium over WTI “has increased about $3.30/bbl” since May 2, he said.

Meanwhile, it was “just another roller-coaster ride” in the broader equity market with the Dow Jones Industrial Average down 1.5% in early trading May 9 amid concerns the European Union might withhold the next round of bailout funds for Greece. But the index later rallied and almost broke even after Greece received most of the promised money.

Jakob said, “The game of bluff continues between Greece and [EU headquarters in] Brussels. The European Financial Stability Facility will make a part payment to Greece and kick the can down the road for a bit longer.”

US inventories

The Energy Information Administration reported May 10 the injection of 30 bcf of natural gas into US underground storage in the week ended May 4, below Wall Street’s consensus for an input of 32 bcf. It brought working gas in storage slightly above 2.6 tcf. That is 799 bcf more than the comparable period a year ago and 803 bcf above the 5-year average.

EIA earlier reported commercial US inventories of crude increased 3.7 million bbl to 379.5 million bbl last week, 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 (OGJ Online, May 9, 2012).

“The overall sequential draw was driven by a 2% weekly increase in motor gasoline demand,” said analysts in the Houston office of Raymond James & Associates Inc. “As a result, petroleum product inventories tracked noticeably lower…with gasoline and distillate inventories down 5.9 million bbl (West Coast gasoline draw of 2.1 million bbl).” Inventories of crude at Cushing, Okla., increased by 1.2 million bbl and are 2.5 million bbl above year-ago levels. “In aggregate, total days of supply fell slightly to 46.4 days, which is more than 2 days below levels from this time last year,” Raymond James analysts reported.

Jakob said, “Stocks of distillates continue to draw down to the levels of 2007 while stocks of crude oil continue to build to the highest absolute level since 1990. Stocks of crude oil on the US Gulf Coast have built 1.3 million bbl and are 4.6 million bbl above the levels of a year ago. Stocks of crude oil in Cushing are building further, but the capacity utilization is lower than a year ago and with the imminent start of the Seaway reversal the WTI contango is not widening, even though the WTI discount to Brent is widening relatively sharply.”

Energy prices

The June contract for benchmark US sweet, light crudes declined 20¢ to $96.81/bbl May 9 on the New York Mercantile Exchange. The July contract decreased 22¢ to $97.15/bbl. On the US spot market, WTI at Cushing was down 20¢ to $96.81/bbl.

Heating oil for June delivery, however, inched up 0.9¢ to $3/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 2.97¢ to $3.02/gal.

The June natural gas contract gained 7.2¢ to $2.47/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 9.8¢ to $2.37/MMbtu.

In London, the June IPE contract for North Sea Brent rose 47¢ to $113.20/bbl. Gas oil for May escalated $13 to $958.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 27¢ to $109.85/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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