MARKET WATCH: Crude price climbs while gas price falls

Oil prices were up Jan. 29 with front-month crude increasing 1.2% in the New York market to its highest closing since mid-September, boosted by indications the US economy is improving. However, natural gas dropped 1.9%, down for the sixth consecutive session on forecasts of warmer weather.

“The strides crude oil prices made in the latter part of the day more than made up for the earlier rough start,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “It appears that oil market participants shrugged off concerns over demand in light of the poor US consumer confidence reading, choosing rather to focus on what the data meant in terms of the Federal Reserve System maintaining its commitment to continue quantitative easing.”

The US consumer confidence index fell 8.1 points in January to 58.6, the lowest level in more than a year, with US workers taking home less pay because of higher Social Security taxes. It marked the third consecutive month of declines after the index posted a 5-year high in October 2012 (OGJ Online, Jan. 29, 2013).

Moreover, the US Department of Commerce reported Jan. 30 the US economy shrank in the fourth quarter of 2012 for the first time since 2009, primarily due to the biggest cut in national defense spending in 40 years. Coupled with the report of weaker consumer confidence, this could resurrect market concerns about future energy demand.

US inventories

The Energy Information Administration said Jan. 30 commercial US crude inventories escalated 5.9 million bbl to 369.1 million bbl in the week ended Jan. 25, more than double Wall Street’s consensus for a 2.5 million bbl increase and surpassing the aggregate gain reported in the 3 previous weeks, maintaining stocks well above average for this time of year. However, gasoline stocks fell 1 million bbl to 232.3 million bbl last week, opposite analysts’ expectations of a 1 million bbl gain. That’s on top of a 1.7 million bbl decline in the week ended Jan. 18. Finished gasoline inventories increased last week while blending components decreased. Distillate fuel stocks fell 2.3 million bbl to 130.6 million bbl last week, surpassing the outlook for a 500,000 bbl decline.

The import of crude into the US increased by 338,000 b/d to 8.1 million b/d last week. In the 4 weeks through Jan. 25, US crude imports averaged 8 million b/d, down 933,000 b/d from the comparable period a year ago. Gasoline imports last week averaged 623,000 b/d while distillate fuel imports averaged 210,000 b/d.

The input of crude into US refineries increased 275,000 b/d to 14.5 million b/d with units operating at 85% of capacity last week. Gasoline production increased to 9.1 million b/d. Distillate fuel production decreased to 4.3 million b/d.

Energy prices

The March contract for benchmark US light, sweet crudes continued its climb, up $1.13 to $97.57/bbl Jan. 29 on the New York Mercantile Exchange. The April contract gained $1.12 to $97.99/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., rose $1.13 $97.57/bbl.

Heating oil for February delivery escalated 4.74¢ to $3.11/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 3.86¢ to $2.97/gal.

The February natural gas contract continued to fall, however, losing 6.3¢ to $3.23/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La. Dropped 4.4¢ to $3.19/MMbtu.

In London, the March IPE contract for North Sea Brent gained 88¢ to $114.36/bbl. Gas oil for February jumped $15.50 to $986.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 37¢ to $110.52/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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