MARKET WATCH: Natural gas price jumps higher; oil rebounds in NY market

Energy prices rebounded June 14 in the New York market as traders ignored negative economic indicators, with the front-month natural gas contract escalating a whopping 14% on a bullish storage report.

The benchmark crude contract rose 1.6% in New York, but the price of North Sea Brent continued to slip lower in the London market.

In the US, unemployment benefits applications increased, creation of new jobs decreased, and consumer prices registered the biggest monthly decline since December 2008, signifying decreased demand for products (OGJ Online, June 14, 2012). The Federal Reserve reported June 15 US factory output dropped 0.4% in May, down from a 0.7% increase in April as auto manufacturers reduced production for the first time in 6 months.

James Zhang at Standard New York Securities Inc., the Standard Bank Group, said “West Texas Intermediate continued to outperform Brent and oil products in general as the market is optimistic that the oil glut at Cushing, Okla., is to be drawn down following the Seaway Pipeline reversal. Meanwhile, oil products are holding their counterseasonal strength as global oil product stocks are at the lower end of their historical range. Although US refineries have gradually increased run rates in the past few weeks, refinery throughput in Europe and Asia has so far failed to boost product stocks.”

Yesterday’s rally in both oil prices and the equity market was based on expectations “that global central banks stand ready to provide a flood of liquidity if the election result [June 17 in Greece] spurs a financial panic,” said analysts in the Houston office of Raymond James & Associates Inc. “The market's gyrations this week have paralleled rumors about the Greek election and what its aftermath might bring.”

Zhang said, “Suffering from a $20/bbl drop and the ongoing Euro-zone debt crisis, the oil market has so far found it difficult to sustain any proper rallies. Risk-taking is hindered by significant event risks in the next few days. On the balance of risks, we do see more upside than downside risks in the oil price.”

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 (OGJ Online, June 14, 2012).

OPEC stands pat

As was generally expected, ministers of the Organization of Petroleum Exporting Countries meeting in Vienna voted to maintain their total production ceiling of 30 million b/d while pledging to “swiftly respond” to any threat to market stability (OGJ Online, June 14, 2012).

They reiterated the increase in price volatility is the result of geopolitical tension and speculation in commodities markets rather than fundamentals of supply and demand. They cited international concern over Euro-Zone sovereign debts and the consequent weakening economic outlook that has reduced demand for oil.

“Saudi Arabia cannot at the same time commit to a supply-cut to please OPEC and commit to replace Iranian barrels to please the G20 [group of 20 finance ministers and central bank governors from the biggest economies],” said Olivier Jakob at Petromatrix in Zug, Switzerland. King Abdullah bin Abdul-Aziz Al Saud of Saudi Arabia is to attend the G20 meeting June 18-19 in Mexico.

“The world crude oil price is currently made in the US. This is a very significant change from the past few years and a trend that will continue for the next 2 years,” Jakob said. “It is not the Chinese demand pull on oil that is driving the dynamics of crude oil flows but the US supply push. For the last 2 years, the US was lacking the transport infrastructure to move the new supplies out of the Midwest, but this is changing thanks to additional pipelines both fixed and on wheels (unit trains).”

He said, “The problem with the US supply push is that OPEC is ill-equipped to deal with it. Saudi Arabia is the global swing supplier but with no light, sweet crude capacity. Hence when a country like Libya is losing its export due to war, there is little that Saudi Arabia can do about it, and when a country like the US is diverting light, sweet crude imports due to increased domestic production, Saudi Arabia also cannot do very much about it. The demand currently is for replacement of Iranian barrels, for refinery production of bottom-ends (Japanese fuel demand), and not for refinery production of the top-end or for replacement of Nigerian barrels. The marginal demand is not for light, sweet crude oil; hence we continue to believe that it will be harder in the second half for Brent to resist the US supply push and therefore that the time-structure of Brent can return to visible pressure.”

Increased export of US petroleum products is reducing European imports of crude. As a result, Jakob said, “The differentials for light, sweet crude oil in the Mediterranean are getting crushed.” Although the price of Brent crude has until now been buoyed by increased exports to South Korea, he said, “The economics are starting to change. The differentials for Mediterranean grades have fallen so much that they will be increasingly competitive in Asia when compared with the artificial European-South Korea economics. If South Korean refiners get a 3% discount when buying Forties crude, Saharan Blend has now moved to a 3% discount to Forties. July Brent expired yesterday, losing most of its backwardation, and Brent August-September was trading flat.”

As more crude flows from Cushing to the Gulf Coast, he said, “The US will be lowering its requirement of West African barrels in the second half of the year; those barrels will have to go somewhere, and as a result the Brent-WTI [spread] is narrowing as Brent needs to narrow its premium to Dubai to push east the barrels that the US is forcing to be diverted to Europe.”

Energy prices

The July contract for benchmark US light, sweet crudes regained $1.29 to $83.91/bbl June 14 on the New York Mercantile Exchange. The August contract rebound $1.30 to $84.22/bbl. On the US spot market, WTI at Cushing was up $1.29 to $83.91/bbl.

Heating oil for July delivery increased 1.69¢ to $2.63/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 2.1¢ to $2.68/gal.

The July natural gas contract jumped 31¢ to $2.50/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., dipped 0.1¢ to $2.19/MMbtu.

In London, the July IPE contract for North Sea Brent lost 10¢ to $97.03/bbl. Gas oil for July dropped $2.75 to $844.75/tonne.

The average price for OPEC’s basket of 12 benchmark crudes was down 34¢ to $95.22/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts


Driving Growth and Efficiency with Deep Insights into Operational Data

When Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST



On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

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