MARKET WATCH: High crude inventory, weak market indicators bring down oil prices

Energy prices continued dropping May 31 with the front-month crude futures contract down 1.5% in the New York market following a larger-than-expected inventory increase.

“Natural gas was flat on the day, but the Energy Information Administration estimated that March demand for the commodity fell 5.4% year-over-year due to unusually mild weather in the first quarter,” said analysts in the Houston office of Raymond James & Associates Inc. The Dow Jones Industrial Average dipped 0.2% to conclude “its worse month in 2 years,” down a net 6.2% in May. “The Standard & Poor’s 500 Index fared similarly,” Raymond James analysts reported.

They said, “A slew of economic data pointed to a weakening employment picture and lackluster economic growth here in the US. Initial jobless claims rose more than expected last week, while the private sector added fewer jobs than expected. Also, the US economy grew at a slower pace than expected in the first quarter of this year.”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, blamed disappointing US jobs data, the latest China Purchasing Manager Index survey showing a near halt in manufacturing, and the “ongoing woes of the Euro-zone debt crisis” for undermining oil prices. “Oil products followed crude down, as the sell-off took place across the board,” he said. “The time spreads in Brent also declined further, while the front-end of the West Texas Intermediate curve held firm as the market anticipates that the reversal of the Seaway Pipeline will alleviate the glut at Cushing, Okla.”

Zhang said, “For now, the market is focusing on the Euro-zone crisis, in particular, the developments in Greece and Spain. However, data from the US and China have been downbeat recently, which added to the bearish sentiment.”

US inventories

EIA reported US crude inventories increased by 2.2 million bbl to 348.7 million bbl in the week ended May 25, above the Wall Street consensus for a 1 million bbl increase. It marked the 10th consecutive week of crude inventory gains. Gasoline stocks decreased 800,000 bbl to 200.2 million bbl, less than the expected 1 million bbl draw. Finished gasoline stocks decreased while blending components remained unchanged. Distillate fuel inventories fell 1.7 million bbl to 117.8 million bbl last week; analysts had expected distillate stocks to remain unchanged.

The Department of Energy agency also reported the injection of 71 bcf of natural gas into US underground storage in the week ended May 25, matching Wall Street’s consensus. That brought working gas in storage to 2.815 tcf, up 732 bcf from the same period a year ago and 724 bcf above the 5-year average (OGJ Online, May 31, 2012).

Crude imports increased 473,000 b/d last week, contributing to the inventory build. “Gasoline and distillate inventories fell, coinciding with a 3.5% and 7% week-over-week increase in gasoline and distillate demand, respectively,” said Raymond James analysts. “The refinery utilization rate ticked up a percentage point to 89.1% as driving season has officially begun. Overall petroleum demand was down 1.9% week-over-week and is down 2.6% compared to the same period last year.” Crude inventories at the key Cushing storage site continued to rise, but only marginally. This was the first EIA inventory report to reflect the reversal of Seaway Pipeline to move crude from Cushing to the Gulf Coast.

Energy prices

The July and August contracts for benchmark US light, sweet crudes each dropped $1.29 to $86.53/bbl and $86.85/bbl, respectively, May 31 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing was down $1.29 to $86.53/bbl in step with the front-month futures contract

The expiring June contract for heating oil fell 3.36¢ to $2.71/gal on NYMEX. Reformulated stock for oxygenate blending for the same month lost 3.32¢ to $2.83/gal.

The July natural gas contract inched up 0.4¢ but closed essentially unchanged at a rounded $2.42/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., decreased 6.5¢ to $2.33/MMbtu.

In London, the July IPE contract for North Sea Brent was down $1.60 to $101.87/bbl. Gas oil for June dropped $11.75 to $870.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $1.69 to $101.06/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Apache’s 2015 capital budget less than half of last year’s $8.5 billion

02/12/2015 Apache Corp., Houston, plans a capital budget of $3.6-4 billion in 2015, with $2.1-2.3 billion directed toward onshore North America and $1.5-1.7 b...

Alaska LNG project partners file resource reports with FERC

02/12/2015 A series of draft environmental and socioeconomic reports for the Alaska LNG project have been submitted to the US Federal Energy Regulatory Commis...

Total reduces budget by 10% to $23-24 billion

02/12/2015 Total SA plans to lower its organic investments to $23-24 billion in 2015 from $26.4 billion in 2014 by reducing spending in brownfield development...

MARKET WATCH: NYMEX crude prices drop back below $50/bbl

02/12/2015 The New York Mercantile Exchange March crude oil contract dropped $1.18 on Feb. 11, closing at $48.84/bbl. The April contract dropped $1.15 to $50....

US House vote sends Keystone XL approval bill to Obama’s desk

02/12/2015 The US House of Representatives voted by 270 to 152 to pass S. 1, which would deem the proposed Keystone XL crude oil pipeline approved more than 6...

Groups object to White River National Forest draft leasing decision

02/12/2015 The Western Energy Alliance, West Slope Colorado Oil & Gas Association, and Public Lands Advocacy jointly filed a formal objection to the US Fo...

Five fatalities, four missing now confirmed following FPSO explosion offshore Brazil

02/12/2015 BW Offshore now reports five fatalities—all employees of BW Offshore—and four crew members missing following the Feb. 11 explosion of the Cidade de...

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

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...
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