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MARKET WATCH: Crude falls, gas gains in mixed markets

Crude oil prices were down in mixed markets Sept. 26 as traders worried about future demand with International Monetary Fund officials insisting European Union creditors take tens of billions of euros in losses on their holdings of Greek government bonds.

“The clash sent European stocks on a nosedive, amid all-too-familiar anti-austerity riots,” said analysts in the Houston office of Raymond James & Associates Inc. “A renewed sense of worry surrounding Spain surfaced as well, sending its yields above the critical 6% level, and the Standard & Poor’s 500 Index reacted by posting losses of 0.6%. West Texas Intermediate dropped 1.5% [in the New York market] to end the session just under $90/bbl despite a bullish Department of Energy petroleum inventories report, and natural gas gained 2.7% from the mounting belief that the industry will not hit maximum storage and a normal (colder than last year) winter is on the way.”

European politicians fear a backlash from voters over bailouts and austerity programs to aid Greece and other Euro-zone members facing financial disaster. Thousands of residents rioted this week in Spain and Greece over austerity programs in those countries.

Meanwhile, oil prices were up in early trading Sept. 27 as the US Department of Labor reported 359,000 new applications for US unemployment benefits last week, down by 26,000 from the previous week to lowest level in 9 weeks. Layoffs have slowed, but hiring hasn’t yet increased enough with only 96,000 jobs added last month, down from 141,000 in July and well below the monthly average of 226,000 added in the first quarter. A total 5.17 million US residents are now drawing unemployment aid, officials said.

US inventories

The DOE’s Energy Information Administration reported the injection of 80 bcf of natural gas into US underground storage in the week ended Sept. 21, slightly more than the Wall Street consensus of 78 bcf. That brought working gas in storage to 3.576 tcf, up 296 bcf from a year ago and 282 bcf above the 5-year average.

EIA earlier said commercial US crude inventories dropped 2.4 million bbl to 365.2 million bbl last week with stocks still above average for the time of year. The Wall Street consensus was for an increase of 1.9 million bbl. Gasoline inventories decreased 500,000 bbl to 195.8 million bbl last week, exactly opposite of the 500,000 bbl gain analysts expected. Finished gasoline decreased while blending components increased. Distillate fuel stocks also dropped 500,000 bbl, to 127.7 million bbl, frustrating a similar market outlook for an addition of 500,000 bbl (OGJ Online, Sept. 26, 2012).

Raymond James analysts said, “Upward [price] momentum has been sluggish with the market struggling to shake off demand concerns. The DOE report also showed total fuel use had declined by 1.1% week-over-week, and while crude inventories were down for the week, they remained extremely high on a seasonally-adjusted comparison. It is worth pointing out that US refinery utilization rates also slipped 1.5%, perhaps as a function of slighter weaker profit margins. However, we do feel that profit margins remain conducive to high refining rates.”

Energy prices

The November contract for benchmark US sweet, light crudes fell $1.39 to $89.98/bbl Sept. 26 on the New York Mercantile Exchange. The December contract dropped $137 to $90.34/bbl. On the US spot market, WTI at Cushing, Okla., was down $1.39 to $89.98/bbl.

Heating oil for October delivery inched up 0.18¢ but closed essentially unchanged at a rounded $3.11/gal on NYMEX. Reformulated stock for oxygenate blending for the same month jumped 11.4¢ to $3.08/gal.

The October natural gas contract escalated 9.9¢ to $3.02/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 7.2¢ to $2.94/MMbtu.

In London, the November IPE contract for North Sea Brent declined 41¢ to $110.04/bbl. Gas oil for October lost $15 to $962.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes decreased $1.15 to $106.84/bbl.

Contact Sam Fletcher at samf@ogjonline.com.


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