MARKET WATCH: Crude prices weaker ahead of oil data, Bernanke testimony

US Fed Chairman Ben Bernanke “surprised absolutely no one” with his testimony to the US Senate Banking Committee Feb. 26 defending the Fed’s $3.1 trillion balance sheet, reported analysts in the Houston office of Raymond James & Associates Inc. They said, “The illustrious chairman deflected concerns about the risks of Quantitative Easing and made it clear that he intends for the current $85 billion/month of bond purchases to continue for the foreseeable future.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “After an initial surge after Bernanke’s testimony, oil markets moved lower again, weighed down by reports that Iran might be taking a more conciliatory approach to negotiations surrounding its nuclear enrichment plans.”

Ground said, “It appears as if Bernanke’s testimony yesterday eased some of the market’s fears over an early end to the Fed’s quantitative easing program that had been sparked by [Federal Open Market Committee] minutes released last week and at the beginning of the year. While Bernanke confirmed the Fed’s concern over the potential costs of its current asset purchases (as highlighted in recent FOMC minutes), he did stress that ‘we do not see the potential costs…as outweighing the benefits of promoting a stronger economic recovery.’”

US inventories

The Energy Information Administration said Feb. 27 commercial US crude inventories increased by 1.1 million bbl to 377.5 million bbl in the week ended Feb. 22, well below Wall Street’s consensus for a 2.5 million bbl gain. Gasoline stocks dropped 1.9 million bbl to 228.5 million bbl in the same period, outstripping analysts’ outlook for a 1 million decline. Finished gasoline inventories increased while blending components decreased. Distillate fuel inventories increased by 600,000 bbl to 124.2 million bbl, below market expectations of 1.6 million bbl loss.

Imports of crude into the US increased 269,000 b/d to 8 million b/d last week. In the 4 weeks through Feb. 22 imports averaged 7.7 million b/d, which was 1.2 million bbl less than in the comparable period in 2012. Gasoline imports last week averaged 575,000 b/d while distillate fuel imports averaged 156,000 b/d.

Input of crude into US refineries was up 335,000 b/d to 14.5 million b/d last week with units operating at 85.1% of capacity. Gasoline production increased to 9.2 million b/d as distillate fuel production increased to just under 4.5 million b/d.

Energy prices

The April and May contracts for benchmark US light, sweet crudes lost 48¢ each to $92.63/bbl and $93.05/bbl, respectively, Feb. 26 on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., followed the April futures contract down 48¢ to $92.63/bbl.

Heating oil for March delivery was down 6.72¢ to $3.03/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 7.95¢ to $2.98/gal.

Weekend snowstorms across the Midwest kept the March natural gas contract climbing, up 1.3¢ to $3.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 3.2¢ to $3.46/MMbtu.

In London, the April IPE contract for North Sea Brent decreased $1.73 to $112.71/bbl. Gas oil for March fell $22 to $956.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $1.10 to $110.10/bbl.

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