MARKET WATCH: Energy prices rise modestly in quiet market

Energy commodities generally posted modest gains June 5 with crude climbing above $84/bbl in the New York market as turmoil over the financially troubled Euro-zone diminished at least for the day.

Although under pressure to reduce rates to stimulate the Euro-zone economy, the European Central Bank left its benchmark interest rate unchanged at a record low 1%. That in turn pressures Euro-zone governments to address their sovereign debt crisis.

“Oil continued to recover from the recent slump as the market waits for [other] central bank actions following the recent deterioration in the global economy,” said James Zhang at Standard New York Securities Inc., the Standard Bank Group. “Oil products in general were also stronger. In addition, product cracks also strengthened despite a sizeable build in product inventories…. Brent time spreads were also stronger in general, aligned with the recovery in flat prices. Implied volatility has also come off after an upward spike [on June 1].”

He said, “So far this week, the oil market appeared to have become more immune to negative macroeconomic news, with each set of disappointing data failing to trigger further price declines. This observation is aligned with the Commodity Futures Trading Commission report where money-mangers have already cut speculative length to the lowest level since September 2010. This makes the oil market more prone to a rally if the global economy and the Euro-zone crisis stabilize. We see the current price level as a good consumer hedging opportunity.”

US inventories

The Energy Information Administration said June 6 commercial US inventories of crude dipped 100,000 bbl to 384.6 million bbl in the week ended June 1. That was short of the Wall Street consensus for a 500,000 bbl draw and left crude stocks above average for this time of year. Gasoline inventories escalated by 3.3 million bbl to 203.5 million bbl, surpassing analysts’ expectations of a 1 million bbl increase. Both finished gasoline and blending components increased last week. Distillate fuel stocks climbed 2.3 million bbl to 120 million bbl, counter to an anticipated reduction of 300,000 bbl last week.

Imports of crude into the US were down 99,000 b/d to 9 million b/d last week In the 4 weeks through June 1, crude imports average just under 8.9 million b/d, down 111,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 836,000 b/d, and distillate fuel imports averaged 98,000 b/d.

The input of crude into US refineries increased 299,000 b/d to 15.5 million b/d last week with units operating at 91% of capacity. Gasoline production decreased to 9.1 million b/d, but distillate fuel production increased to 4.7 million b/d.

Energy prices

The July contract for benchmark US light, sweet crudes rose 31¢ to $84.29/bbl June 5 on the New York Mercantile Exchange. The August contract advanced 30¢ to $84.57/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 31¢ to $84.29/bbl.

Heating oil for July delivery inched up 0.67¢ to $2.63/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 1.4¢ to $2.68/gal.

The July natural gas contract gained 3.1¢ to $2.45/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 7.4¢ to $2.39/MMbtu.

In London, the July IPE contract for North Sea Brent ipped 1¢ to $98.84/bbl. Gas oil for June was up $5 to $848/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes regained 71¢ to $96.19/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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