MARKET WATCH: Early rally in NY crude prices fades to a loss

Crude prices climbed in early trading Jan. 8 but closed with small losses in mixed markets.

The early rally in crude “was stymied by the combination of a stronger dollar and concerns about growing US crude and product inventories,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Brent, however, managed to hold onto most of its earlier gains (buoyed by index rebalancing).”

In Houston, analysts with Raymond James & Associates Inc. reported, “After the mega-rally last week, [equity] stocks fell for the second straight day as exuberance fades away and caution lingers ahead of earnings season. The Standard & Poor’s 500 Index was down 0.3% on the session, compounded by a declining dollar and weaker-than-expected trade data out of Germany, up to now one of the few bright spots in the Euro-zone.” The front-month natural gas contract dropped 1.5% with mild weather across the US.

Ground noted markets were “edgy but noncommittal, as evidence by the heightened volatility in a fairly tight trading range” Jan. 9 prior to US Energy Information Administration’s weekly oil inventory report. He said, “While a build in gasoline stocks is expected in the first quarter, current levels are already unusually high, well above the 5-year range.”

US inventories

EIA reported commercial US crude inventories increased 1.3 million bbl to 361.3 million bbl in the week ended Jan. 4, less than Wall Street’s consensus for a 2 million bbl gain. However, gasoline stocks jumped 7.4 million bbl to 233.1 million bbl during the same period, far exceeding the expected 2.5 million bbl gain. Finished gasoline inventories decreased while blending components increased. Distillate fuel stocks escalated 6.8 million bbl to 130.7 million bbl, far above the 1.9 million bbl increase the market anticipated.

The American Petroleum Institute earlier reported US crude stocks were up 2.4 million bbl to 360.8 million bbl, while gasoline inventories shot up 7.9 million bbl to 227.1 million bbl. API reported distillate stocks climbed 5.9 million bbl to 131.4 million bbl.

The import of crude into the US surged by 1.2 million b/d to 8.3 million b/d last week, EIA officials said. In the 4 weeks through Jan. 4 US crude imports averaged 8 million b/d, down 911,000 b/d from the comparable period in 2012. Gasoline imports last week averaged 447,000 b/d while distillate fuel imports averaged 197,000 b/d.

The input of crude into US refineries increased 84,000 b/d to 15.3 million b/d last week with units operating at 89.1% of capacity, EIA reported. Gasoline production decreased to 8.4 million b/d, but distillate fuel production increased to 4.9 million b/d.

Energy prices

The February contract for benchmark US light, sweet crudes climbed as high as $93.80/bbl in intraday trading Jan. 8 but closed at $93.15/bbl, down 4¢ for the day on the New York Mercantile Exchange. The March contract dipped 3¢ to $93.60/bbl. However, the April contract was unchanged, and those for subsequent months registered modest gains progressively through February 2014. On the US spot market, West Texas Intermediate at Cushing, Okla., followed the front-month futures contract down 4¢ to $93.15/bbl.

Heating oil for February delivery gained 2.64¢ to $3.06/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 1.7¢ to $2.79/gal.

The February natural gas contract continued its decline, down 4.8¢ to $3.22/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 9.7¢ to $3.21/MMbtu.

In London, the February IPE contract for North Sea Brent increased 54¢ to $111.94/bbl. Gas oil for January gained $6.75 to $945.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes rebound by 57¢ to $108.72/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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