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MARKET WATCH: Equity, energy commodity prices continue rally

Equity and energy commodity prices continued to rally Aug. 7, “driven by the old adage ‘no news is good news’ as there was a distinct lack of market-moving news,” said analysts in the Houston office of Raymond James & Associates Inc.

“Crude oil enjoyed another day of gains as hopes of further central bank easing and increasingly positive sentiment around the Euro-zone remained in place,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

He said, “We remain concerned that weaker product demand (especially gasoline) could translate into weaker demand for crude down the line. We don’t feel that our caution is reason to get bearish on crude oil, but we would not get too excited about the potential for US crude inventory draws to push West Texas Intermediate sustainably above $90/bbl.”

Ground noted, “Tropical storm Ernesto, which is headed towards the Bay of Campeche, an area where most of Mexico’s crude oil production comes from, is now apparently weakening. This has added to concerns over possible weaker US demand, bringing some downward pressure to crude oil this morning.”

Crude prices declined in early trading Aug. 8 with traders anticipating another decline in US inventories.

The equity market also retreated after the Bank of England said that country's economy likely will stagnate this year. That’s counter to the bank’s forecast 3 months ago for an annual growth of 0.8%. The French central bank also announced France's economy is expected to contract in the third quarter. Continued concerns about Europe’s economic crisis overshadowed mixed earnings reports.

US inventories

The Energy Information Administration said Aug. 8 commercial US crude inventories fell 3.7 million bbl to 369.9 million bbl in the week ended Aug. 3, exceeding Wall Street’s consensus for a decline of 1.6 million bbl. Gasoline stocks dropped 1.8 million bbl to 206.1 million bbl, exactly as Wall Street projected. Finished gasoline inventories increased while blending components decreased. Distillate fuel inventories were down 700,000 bbl to 123.5 million bbl last week, opposite analysts’ expectations of a 300,000 bbl increase.

The American Petroleum Institute earlier reported commercial US crude stocks fell 5.4 million bbl to 364.3 million bbl last week. It said gasoline inventories increased 417,000 bbl to 207.7 million bbl, while distillate stocks rose 2.4 million bbl to 124.9 million bbl.

EIA said imports of crude into the US increased 221,000 b/d to 8.6 million b/d last week. In the 4 weeks through Aug. 3, crude imports averaged 8.9 million b/d, down 453,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 457,000 b/d, while distillate fuel imports averaged 71,000 b/d.

Crude input into US refineries increased 36,000 b/d to 15.6 million b/d last week with units operating at 92.6% of capacity. Gasoline production increased to just under 9.3 million b/d; distillate fuel production increased to 4.7 million b/d.

Energy prices

The September contract for benchmark US light, sweet crudes rose $1.47 to $93.67/bbl Aug. 7 on the New York Mercantile Exchange. The October contract gained $1.48 to $93.94/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.47 to $93.67/bbl.

Heating oil for September delivery increased 5.71¢ to $3/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 6.91¢ to $2.99/gal.

The September natural gas contract continued climbing, up 5.6¢ to $2.96/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained 8.2¢ to $2.99/MMbtu.

In London, the September IPE contract for North Sea Brent increased $2.45 to $112/bbl. Gas oil for August escalated $16.75 to $947/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.91 to $107.58/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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