MARKET WATCH: New York crude oil price falls with Fed criticism

Crude oil prices continued declining Sept. 25 in a mixed New York market after Charles Plosser, president of the Philadelphia Federal Reserve Bank, said the system’s latest stimulus program is “unlikely” to contribute much to US employment or economic growth.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said oil prices responded strongly with West Texas Intermediate dropping $2/bbl and Brent down $1/bbl following remarks by Plosser, a leading hawk in the Fed System and a critic of Chairman Ben Bernanke’s monetary policy. But when Fed members earlier announced an aggressive plan to stimulate stock prices and to maintain low-level interest rates, even Bernanke acknowledged it was no panacea for slow growth and high employment likely to continue through next year (OGJ Online, Sept. 13, 2012).

The market also was undercut by indications the German Central Bank may not participate further in Greek bailouts. The Standard & Poor’s 500 Index closed down 1.1%, “marking its worst loss since June as the outlook for global growth remained bleak,” said analysts in the Houston office of Raymond James & Associates Inc. “Demand concerns pressured crude, which fell 0.6% on the session.” The SIG Oil Exploration & Production Index and the Oil Service Index underperformed the broader market, dropping 1.6% and 1.5%, respectively.

“Despite the broad selloff, gas ended the day with a healthy 3% gain, albeit the jump was largely attributable to book squaring ahead of October's contract expiration,” Raymond James analysts reported.

Oil prices fell further in early trading Sept. 26 as thousands of protesters clashed with riot police in Athens and Madrid over proposed spending cuts and tax hikes.

US inventories

The Energy Information Administration said Sept. 26 commercial US crude inventories dropped 2.4 million bbl to 365.2 million bbl in the week ended Sept. 21, 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.

Imports of crude into the US decreased 2.3 million b/d to 7.6 million b/d last week. In the 4 weeks through Sept. 21, crude imports averaged 8.5 million b/d, down 272,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 491,000 b/d while distillate fuel imports averaged 108,000 b/d.

The input of crude into US refineries was down 292,000 b/d to 14.6 million b/d last week with units operating at 87.4% of capacity. Gasoline production declined to 8.9 million b/d, but distillate fuel production increased to 4.6 million b/d.

Energy prices

The November contract for benchmark US light, sweet crudes declined 56¢ to $91.37/bbl Sept. 25 on the New York Mercantile Exchange. The December contract decreased 54¢ to $91.71/bbl. On the US spot market, WTI at Cushing, Okla., was down 56¢ to $91.37/bbl.

Heating oil for October delivery inched up 0.99¢ to $3.11/gal on NYMEX. Reformulated stock for oxygenate blending for the same month gained 4.95¢ to $2.97/gal.

The October natural gas contract rose 8.7¢ to $2.92/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 4.3¢ to $2.86/MMbtu.

In London, the November IPE contract for North Sea Brent ended the session with a gain, up 64¢ to $110.45/bbl. Gas oil for October escalated $11 to $977.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 52¢ to $107.99/bbl.

Ground said, “We maintain that current prices could move lower as the supply environment improves, although Middle East tension and monetary accommodation should limit any downside. We forecast an average of $105/bbl for Brent in the fourth quarter from an approximate third quarter average of $109/bbl.”

Contact Sam Fletcher at samf@ogjonline.com.

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