MARKET WATCH: Oil prices decline amid economic worries

Oil prices declined Nov. 27 in markets worried about the world economy although President Barack Obama says he expects Congress can agree on a framework for reducing US debt before Christmas.

Having successfully used the internet before for political purposes, Obama is urging the populace to pressure Congress through social media.

Meanwhile, analysts in the Houston office of Raymond James & Associates Inc. reported, “The market's bipolar disorder has continued, yesterday being one of the depressive phases. The Standard & Poor’s 500 Index closed down 0.5% despite more clarity on the Greek bailout. Meanwhile, concerns about oversupply pressured crude prices.” Crude dipped 0.6% in the New York market, but the front-month natural gas contract gained 1.1%. Energy stocks followed oil prices, with losses of 0.7% and 0.8% respectively for the SIG Oil Exploration & Production Index and the Oil Service Index.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, earlier said, “With a ceasefire between Israel and Hamas having been brokered now—and although fragile, still appearing to hold—this [crisis] point of support [of oil prices] has faded as quickly as it started. However, Middle East concerns remain, as President Mohammed Morsi (one of the facilitators in brokering the Hamas-Israel ceasefire) is facing unrest at home. But this is not to the same extent.”

Ground said, “The main impetus for continued support for crude oil markets will have to come from an easing of Euro-zone concerns and progress on a US fiscal cliff deal. Both criteria are plagued with uncertainty and leave the market more open than usual to the vagaries of speculation and rumor.”

US inventories

The Energy Information Administration said Nov. 28 commercial US crude inventories decreased 300,000 bbl to 374.1 million bbl in the week ended Nov. 23. Wall Street’s consensus was for a 400,000 bbl increase. Gasoline stocks climbed 3.9 million bbl to 204.3 million bbl, far exceeding analysts’ expectations of a 900,000 bbl gain. Both finished gasoline and blending components increased. Distillate fuel inventories declined 800,000 bbl to 112 million bbl, well below average for this time of year, while the market expected a 500,000 bbl build.

The American Petroleum Institute earlier reported US crude stocks increased 1.96 million bbl to 373 million bbl last week, with gasoline inventories up 2.3 million bbl to 198.3 million bbl and distillate stocks gaining 268,000 bbl to 114.4 million bbl.

Imports of crude into the US rose 350,000 b/d to 8.1 million b/d in that same period. In the 4 weeks through Nov. 25, US crude imports averaged 7.9 million b/d, a reduction of 699,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 494,000 b/d while distillate fuel imports averaged 188,000 b/d.

The input of crude into US refineries increased 285,000 b/d to 15.2 million b/d last week with units operating at 88.6% of capacity. However, gasoline production decreased to 8.7 million b/d, said EIA officials, while distillate fuel production was down to 4.6 million b/d last week.

In a separate report, EIA said US imports of Canadian crude rose to record levels in the first 8 months of this year although the total amount of crude imported from foreign suppliers is falling. As a result, Canada’s share of total US oil imports increased to 28% during January-August from 25% in 2011.

Energy prices

The January and February contracts for benchmark US light, sweet crudes lost 56¢ each to $87.18/bbl and $87.81/bbl, respectively, Nov. 27 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down 56¢, matching the front-month futures contract’s closing price of $87.18/bbl.

Heating oil for December delivery dropped 3.71¢ to $3.01/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, regained 0.58¢ but closed essentially unchanged at $2.73/gal.

The December natural gas contract increased 3.9¢ to $3.77/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.4¢ to $3.76/MMbtu.

In London, the January IPE contract for North Sea Brent fell $1.05 to $109.87/bbl. Gas oil for December decreased $7.75 to $940.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 41¢ to $108.07/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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