MARKET WATCH: Crude posts marginal loss in fluctuating market

The front-month crude contract posted a marginal loss after fluctuating within a $2/bbl range Feb. 6 on the New York market, but natural gas increased 0.6% on forecasts of colder weather.

“An intensifying decline during the first half of the day gave way to a strong relief rally, leaving oil markets little changed from the previous day’s close,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. He credited geopolitical flare-ups in Tunisia and Syria for reversing the market’s early decline from bearish inventory reports. 

In Houston, analysts with Raymond James & Associates Inc. noted rising political concerns in Spain and Italy.

“Many have called for a resignation of Spanish Prime Minister Rajoy following allegations of a potential slush fund, while Silvio Berlusconi is becoming more competitive in the Italian prime minister race, fueling fears of renewed financial instability,” they said. “While the European uncertainty led to early losses, the broader markets bounced back to end the day flat after positive earnings.” The Oil Service Index continued its decline, down 0.4%. The SIG Oil Exploration & Production Index continued to rise, up 1%.

During early trading Feb. 7, Ground said, “We’ve seen the market take heart from the fact that Saudi Arabian crude oil production appears to have remained steady in January. The positive reaction to the news is most likely because the decline in December’s production was generally taken as a response to declining oil demand. Consequently, markets are likely reasoning that steady Saudi production in January must imply steady global demand.”

US inventories

The Energy Information Administration reported the withdrawal of 118 bcf of natural gas from US underground storage in the week ended Feb. 1, less than Wall Street’s consensus for a pull of 125 bcf. That reduced gas in storage to 2.684 tcf, down 226 bcf from the comparable period in 2012 but 351 bcf above the 5-year average.

EIA earlier said commercial US crude inventories increased 2.6 million bbl to 371.7 million bbl in the same week, slightly below Wall Street’s consensus for a 2.7 million bbl gain. Gasoline stocks climbed 1.7 million bbl to 234 million bbl in the same period, surpassing analysts’ expectations of a 900,000 bbl increase. Finished gasoline inventories decreased while blending components increased last week. Distillate fuel inventories dropped 1 million bbl to 129.6 million bbl, a steeper decline than the projected 600,000 bbl decrease (OGJ Online, Feb. 6, 2013).

“The headline increase in ‘Big Three’ inventories [crude, gasoline, and distillate fuels] was a bit larger relative to consensus estimates, partly driven by lower imports,” said Raymond James analysts. “Other petroleum products came in higher than last week, with a large build in unfinished oils for the second consecutive week. Meanwhile, refinery utilization dropped from 85% to 84.2%, and demand for total petroleum products fell 3.4%, the biggest weekly decline in 4 weeks.”

Ground was “encouraged” crude stocks at Cushing, Okla., were down by 315,000 bbl last week following a surprise increase of 284,000 bbl the previous week. “However, this did not appear to be enough to completely calm concerns over the Seaway Pipeline off-take, given the mild widening of the West Texas Intermediate-Brent spread yesterday. Noting the week-to-week slip in implied demand across crude oil, distillates, and gasoline, our overall take on the data is negative.”

Energy prices

The March and April contracts for benchmark US sweet, light crudes dipped 2¢ each to $96.62/bbl and $97.09/bbl, respectively, Feb. 6 on the New York Mercantile Exchange.

On the US spot market, WTI at Cushing also lost 2¢ to match the front-month contract’s $96.62/bbl closing.

Heating oil for March delivery slipped 0.55¢ to $3.19/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.23¢ but closed essentially unchanged at a rounded $3.04/gal.

The March natural gas contract increased 1.9¢ to $3.42/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., climbed 4¢ to $3.38/MMbtu.

In London, the March IPE contract for North Sea Brent gained 21¢ to $116.73/bbl. Gas oil for February increased $1.25 to $1,011.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes rose 42¢ to $113.10/bbl.

Contact Sam Fletcher at samf@ogjonline.com

 

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