MARKET WATCH: Energy prices slide lower as economic woes rise

Energy prices dribbled lower June 14 with the front-month crude contract down 0.8% to an 8-month low in New York and North Sea Brent posting a minimal decline to its lowest level in 17 months.

“Crude tracked the broader market lower as weaker-than-expected US retail sales numbers and the looming Greek vote [on June 17] weighed on shares,” said analysts in the Houston office of Raymond James & Associates Inc. “Natural gas also saw a 2.1% dip into the red on a forecast for extended cooler weather in the coming summer months.”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said, “The oil market was softer yesterday on a slightly bearish US inventory report and ongoing uncertainty over the future of the Euro-zone. Oil products continued to outperform crude, in particular US gasoline due to another week of stock draws. Time spreads in both Brent and West Texas Intermediate were firmer, which is in sharp contrast with the alleged oversupply situation in the crude market. That said, price differentials for physical cargoes weakened during the last few days, while contango has emerged in the dated Brent market structure. In the options market, implied volatility softened slightly but remained substantially higher than back in April.”

Economic woes

Banks and investors are braced for the likelihood financially troubled and politically torn Greece will leave the Euro-zone, Raymond James analysts reported. The bigger economies of Italy and Spain also are at risk because of sovereign debt. Overnight, Moody’s Investors Service Inc. downgraded Spain's sovereign debt rating from A3 to Baa3, just one grade above junk status. In early trading June 14, Spain’s benchmark 10-year bonds rose to a record 6.96%, the highest level since 1999.

The US Department of Labor reported June 14 initial unemployment benefits applications rose by 6,000 to a seasonally adjusted 386,000. The government earlier revised the previous week up to 380,000 new applications. The less volatile 4-week average rose for the third straight week to 382,000—the highest level in 6 weeks.

Not only are layoffs continuing, but employers have added a monthly average of only 96,000 jobs for the last 3 months, down from a monthly average of 252,000 new jobs in the previous 3 months.

The government also reported US consumer prices fell 0.3% in May, the largest decline since December 2008, signifying declining demand. All of these negative economic indicators raise doubts of the country’s economic recovery and puts more pressure on the Federal Reserve Board to take steps again to stimulate the US economy. Results of its earlier efforts to pump money into the economy appear to have been minor.

Meanwhile, ministers of the Organization of the Petroleum Exporting Countries meeting in Vienna were divided over oil production. Hurt by international sanctions, Iran wants OPEC to reduce production in order to raise oil prices. But Saudi Arabia has increased production in recent months. Analysts expect no changes from the current meeting.

US inventories

The Energy Information Administration reported the injection of 67 bcf of natural gas into US underground storage in the week ended June 8. That was below Wall Street’s input consensus of 75 bcf. Working gas in storage now stands at 2.944 tcf, up 708 bcf from the comparable period a year ago and 666 bcf above the 5-year average.

EIA earlier reported US inventories of crude declined 200,000 bbl to 384.4 million bbl last week. That is well below Wall Street’s consensus for a draw of 1.5 million bbl, leaving crude stocks still above average for this time of year. Gasoline inventories decreased 1.7 million bbl to 201.8 million bbl, below average supply for this seasonal period and counter to analysts’ predictions of an increase of 1.4 million bbl. Finished gasoline inventories increased while blending components stocks decreased last week. Distillate fuel inventories dipped 100,000 bbl to 120 million bbl; the market’s outlook was for an increase of 1.2 million bbl (OGJ Online, June 13, 2012).

Raymond James analysts said, “Petroleum inventories fell as a surge in demand trickled through the supply chain. Crude inventories saw their second draw in 10 weeks, while crude imports rose. Gasoline and distillate inventories saw draws, as gasoline and distillate demand jumped 5.6% and 9.1%, respectively.”

They noted refinery utilization inched up to 92% last week from 91%, helping spur the decline in crude stocks. “Overall, petroleum demand was up 6.5% week-over-week and is up 1.6% vs. last year on a 4-week moving average basis. Total days of supply fell 3 days and are 2.8 days below year-ago levels. Finally, Cushing, Okla., inventories fell, though only marginally,” they said.

Energy prices

The July and August contracts for benchmark US sweet, light crudes each lost 70¢ June 13 to $82.62/bbl and $82.92/bbl, respectively, on the New York Mercantile Exchange, wiping out their twin gains in the previous session. On the US spot market, WTI at Cushing was down 70¢ to $82.62/bbl, keeping pace with the front-month futures contract.

Heating oil for July delivery declined 1.06¢ to $2.61/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.52¢ to $2.66/gal.

The July natural gas contract dropped 4.7¢ to $2.19/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 0.5¢ to $2.20/MMbtu.

In London, the July IPE contract for North Sea Brent dipped 1¢ to $97.13/bbl. The new front-month July contract for gas oil gained $1.50 to $847.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes rose 57¢ to $95.56/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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