MARKET WATCH: Crude oil prices continue to waffle

Crude oil prices continued to waffle, dropping 1.2% Oct. 10 for the fifth loss over the last eight trading sessions in the New York market. Prices were up in early trading Oct. 11, however, as geopolitical tensions increased in the Middle East.

“Worries weighed on broader markets, resulting in a triple-digit drop for the Dow Jones Industrial Average (down 1%). Energy followed the broader markets south, as investors digested the weak International Monetary Fund world economic outlook and the Organization of Petroleum Exporting Countries’ oil demand cut on top of the earnings worries,” said analysts in the Houston office of Raymond James & Associates Inc. “Natural gas posted modest gains of 0.4%.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “Supply considerations and fears over demand destruction, particularly in the US, saw crude oil prices plummet during early US trading. However, these concerns were soon brushed aside as tensions between Syria and Turkey appeared to escalate after Turkish fighter jets forced a Syrian passenger plane to land at Ankara, on suspicion that the aircraft was carrying military cargo. This pushed crude oil higher overnight with the upward trend continuing this morning. A weaker dollar is also adding to the upward impetus.”

The Airbus A320 in route from Moscow to Damascus was to land in Turkey Oct. 10. Although Syria denied there was anything illegal about the flight, Turkish officials said Oct. 11 the aircraft was carrying equipment and ammunition destined for the Syrian Defense Ministry.

In other news, the US Department of Labor reported 339,000 new applications for unemployment benefits were filed last week, down by 30,000 to lowest number of new requests since February 2008. More than 5 million US residents are still receiving unemployment aid, although many have been dropped from the rolls after exhausting their benefits and giving up job searches.

Labor officials said US unemployment fell to 7.8% in September, dropping below 8% for the first time since January 2009 largely because of increased part-time employment.

US inventories

The Energy Information Administration said Oct. 11 US crude inventories increased 1.7 million bbl to 366.4 million bbl in the week ended Oct. 5, exceeding Wall Street’s consensus for a growth of 1.5 million bbl. Gasoline stocks declined 500,000 bbl to 195.4 million bbl, opposite analysts’ expectations of a 300,000 bbl increase. Finished gasoline decreased while blending components increased. Distillate fuel inventories dropped 3.2 million bbl to 120.9 million bbl, exceeding the 1 million bbl decline the market expected.

The American Petroleum Institute earlier reported crude stocks in the US were up 1.6 million bbl to 364.6 million bbl last week, with gasoline inventories gaining 2.5 million bbl to 200.3 million bbl and distillate stocks down 6.2 million bbl to 120.8 million bbl.

EIA said imports of crude into the US increased 115,000 b/d to 8.2 million b/d last week. In the 4 weeks through Oct. 5 US crude imports averaged 8.4 million b/d, down 517,000 b/d from the comparable period last year. Gasoline imports last week averaged 502,000 b/d, while distillate fuel imports averaged 114,000 b/d.

The input of crude into US refineries declined 97,000 b/d to 14.7 million b/d with units operating at 86.7% of capacity last week, EIA reported. Gasoline production decreased to 8.6 million b/d, and distillate fuel production declined to 4.3 million b/d.

EIA also reported the injection of 72 bcf of natural gas into US underground storage last week, short of the 77 bcf Wall Street expected. That put working gas in storage at 3.725 tcf, up 236 bcf from the comparable period a year ago and 269 bcf above the 5-year average.

Energy prices

The November and December contract for benchmark US sweet, light crudes fell $1.14 each to $91.25/bbl and $91.64/bbl, respectively, Oct. 10 on the New York Mercantile Exchange. West Texas Intermediate at Cushing, Okla., was down the same amount, closing at $91.25/bbl on the US spot market.

Heating oil for November delivery increased 0.99¢ to $3.21/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.06¢ but finished essentially unchanged at a rounded $2.96/gal.

The November natural gas contract advanced 0.8¢ to $3.48/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., rebound 6¢ to $3.24/MMbtu.

In London, the November IPE contract for North Sea Brent declined 17¢ to $114.33/bbl. Gas oil for October climbed $23.50 to $1,008/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.48 to $110.94/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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