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MARKET WATCH: Crude oil prices continue to advance

Crude oil prices generally rallied July 17 with front-month crude futures up 0.9% in New York, but there seemed to be little market reaction to the July 16 incident when a US Navy refueling ship fired on a fishing boat near the Strait of Hormuz.

“The broader market reacted positively to some less-bad-than-expected earnings, with the Standard & Poor’s 500 Index gaining 0.6% despite a cagey, noncommittal performance by [US Federal Reserve Chairman Ben Bernanke] in front of Congress,” said analysts in the Houston office of Raymond James & Associates Inc. (OGJ Online, July 17, 2012). The SIG Oil Exploration & Production Index and the Oil Service Index were up 1.4% and 0.5%, respectively.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “Crude oil markets began to slide [earlier in the July 17 session] after US core consumer inflation remained above the Fed’s 2% year-over-year, thereby restricting the Fed’s ability to engage in more “quantitative easing” (QE). Better-than-expected US industrial production extended the fall in prices, providing another blow to QE hopes.”

However, there was a recovery later in the session “most likely as participants viewed the slide as overdone in light of Bernanke’s willingness to respond, should the economy require it,” said Ground. “Nevertheless, the market remains generally weighed down by disappointment on the QE front.”

US inventories

The Energy Information Administration said July 18 commercial US crude inventories declined 800,000 bbl to 377.4 million bbl in the week ended July 13. That was far short of Wall Street’s consensus for a 1.3 million bbl drop, with stocks remaining above average for the time of year. Gasoline inventories fell 1.8 million bbl to 205.9 million bbl last week, compared with analysts’ expectations of a 1.2 million bbl build. Both finished gasoline and blending components stocks were down. Distillate fuel inventories increased 2.6 million bbl to 123.5 million bbl, twice the 1.3 million bbl gain the market projected.

Imports of crude into the US increased 311,000 b/d to 8.9 million b/d last week. In the 4 weeks through July 13, crude imports averaged 8.9 million b/d, an increase of 405,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 635,000 b/d. Distillate fuel imports averaged 84,000 b/d.

Input of crude into US refineries fell 236,000 b/d to 15.5 million b/d last week, with units operating at 92% of capacity. Gasoline production decreased to 8.9 million b/d. Distillate fuel production increased to 4.8 million b/d.

Energy prices

The August contract for benchmark US light, sweet crudes advanced 79¢ to $89.22/bbl July 16 on the New York Mercantile Exchange. The September contract gained 73¢ to $89.54/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., continued in step with the front-month futures contract, up 79¢ to $89.22/bbl.

Heating oil for August delivery regained 1.45¢ to $2.84/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.97¢ but closed essentially unchanged at a rounded $2.85/gal.

The August natural gas contract slipped 0.5¢ but also finished virtually unchanged at a rounded $2.80/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 7.4¢ to $2.83/MMbtu.

In London, the new front-month September IPE contract for North Sea Brent rose 63¢ to $104/bbl. Gas oil for August was up $5 to $894.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes climbed $1.36 to $101.29/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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