MARKET WATCH: Crude oil price decline steepens

Crude oil prices declined at a steeper rate July 31 with crude down 1.9% in the New York market amid traders’ concerns about results from the 2-day meeting of the Federal Open Market Committee, the policy-making arm of the Federal Reserve Bank, which concludes Aug. 1.

The SIG Oil Exploration & Production Index was down 1.4%, and the Oil Service Index declined 2.2%, reflecting uncertainty about the Fed. “Broader markets were more resilient though, with Standard & Poor’s 500 Index losing only a fraction of a percent,” said analysts in the Houston office of Raymond James & Associates Inc.

“Crude oil prices took a dive after a slew of generally better-than-expected US data,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Personal income rose 0.5% month-over-month during June, while spending was unchanged. The fall in house prices eased to 0.7% year-over-year according to [Standard & Poor's Case-Shiller Home Price Index], and the Chicago Purchasing Managers Index bested expectations, coming in at 53.7 and better than the previous month’s reading. While the  aforementioned data flow did lend oil markets a slight downward bias, it was the Conference Board consumer confidence reading at a much improved and much better-than-expected 65.9 (June’s number revised to 62.7, consensus was for 61.5) that sent prices plunging.”

Ground reported, “Energy markets remain subdued after disappointing Chinese PMI data and also due to some jitters over whether or not the FOMC meeting…[and the ECB decision tomorrow] will see some announcement of monetary accommodation. Our base case remains that this is unlikely to happen today, except for a possible shifting of rate-hike expectations into 2015, which could see a pull-back in commodities across the board.”

Meanwhile, the Institute for Supply Management said its index of US manufacturing activity increased to 49.8 in July, from 49.7 in June, indicating 2 consecutive months of contractions below 50 for the first time in 3 years.

US inventories

The Energy Information Administration said Aug. 1 commercial US crude inventories fell 6.5 million bbl to 373.6 million bbl in the week ended July 27, far beyond Wall Street’s consensus for a reduction of 1 million bbl. Crude stocks remain above average for this time of year, however. Gasoline inventories dropped 2.2 million bbl to 207.9 million bbl last week, opposite analysts’ expectations of an 800,000 bbl gain. Both finished gasoline and blending components decreased. Distillate fuel stocks lost 1 million bbl to 124.3 million bbl last week, dashing the market’s projection of a 1.1 million increase.

The American Petroleum Institute earlier reported US commercial crude inventories down a whopping 11.6 million bbl to 369.5 million bbl last week. It said gasoline stocks lost 1.3 million bbl to 207.2 million bbl, while distillate inventories fell 1.4 million bbl to 122.6 million bbl.

EIA said imports of crude into the US were down 1.2 million b/d to 8.4 million b/d last week. In the 4 weeks through July 27, US crude oil imports averaged 8.9 million b/d, down 428,000 b/d from the comparable period last year. Gasoline imports last week averaged 638,000 b/d. Distillate fuel imports averaged 62,000 b/d.

The input of crude into US refineries dropped 225,000 b/d to 15.6 million b/d last week with units operating at 92.2% of capacity. Gasoline production decreased to just under 9 million b/d, while distillate fuel production declined to 4.6 million b/d, EIA reported.

Energy prices

The September and October contracts for benchmark US light, sweet crudes fell $1.72 each to $88.06/bbl and $88.34/bbl, respectively, July 31 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down $1.72 to $88.06/bbl.

Heating oil for August delivery lost 3.74¢ to $2.84/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 2.22¢ to $2.91/gal.

The September natural gas contract dipped 0.5¢ but closed essentially unchanged at a rounded $3.21/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 6.2¢ to $3.22/MMbtu.

In London, the September IPE contract for North Sea Brent was down $1.28 to $104.92/bbl. Gas oil for August dropped $6.75 to $906.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 72¢ to $102.22/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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