MARKET WATCH: Inventory report buoys US crude futures prices in mixed market

The front-month crude contract recovered 0.1% Feb. 27 in the New York futures market on a smaller-than-expected gain in US inventory, but petroleum products were down while the new front-month natural gas contract continued to decline.

In the equity market, the Dow Jones Industrial Average climbed to a 5-year high, up 1.3% for the day “as investors continued to celebrate [Federal Reserve Chairman] Ben Bernanke's commitment to loose monetary policy,” said analysts in the Houston office of Raymond James & Associates Inc. “But with Italian elections signaling a renewal of the Euro-zone crisis and the pending sequestration [with its broad, automatic cuts in the US budget], the near-term picture remains hazy.”

Bernanke defended the Fed’s $85 billion/month quantitative easing program before the US Senate Banking Committee (OGJ Online, Feb. 27, 2013).

“Oil markets, in particular the Brent contract, continued to be weighed down by negative sentiment,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Growing concerns over demand has lent the market a negative bent of late, especially as Euro-zone problems look likely to get worse…. We have long been concerned over the possible damaging effects to business and consumer confidence, and ultimately the US economy, of the various fiscal hurdles the country faces in the first half of 2013 and have felt that the oil price buoyancy of the past 2 months was overdone in light of these threats to the demand of world’s largest consumer of oil.”

He also expressed concern the oil market may be too optimistic in its expectation of Chinese demand. “While we have no doubt the Chinese economy has landed softly, there are still considerable question-marks about the extent of future growth. This uncertainty will only be heightened over the coming months by data flow distorted by the Lunar New Year holidays, especially since the movable nature of these celebrations makes it difficult to make seasonal adjustments,” Ground said.

In other news, the US Department of Labor reported 344,000 new applications for unemployment benefits were filed last week, down 22,000 from the previous week. Some 5.8 million US residents were receiving unemployment aid in the week ended Feb. 9, the latest available data. That’s down from nearly 7.5 million a year ago as some recipients have found jobs and others have used up all of their benefits.

US inventories

The Energy Information Administration reported the withdrawal of 171 bcf of natural gas from US underground storage in the week ended Feb. 22, slightly more than Wall Street’s consensus for a pull of 170 bcf. That left 2.229 tcf of working gas in storage, down 307 bcf from the comparable period a year ago but 308 bcf above the 5-year average.

EIA earlier reported commercial US crude inventories increased 1.1 million bbl to 377.5 million bbl last week, 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 bbl decline. Finished gasoline inventories increased while blending components decreased. Distillate fuel inventories increased 600,000 bbl to 124.2 million bbl, opposite market expectations of 1.6 million bbl loss (OGJ Online, Feb. 27, 2013).

Energy prices

The April contract for benchmark US sweet, light crudes recouped 13¢ to $92.76/bbl Feb. 27 on the New York Mercantile Exchange. The May contract took back 10¢ to $93.15/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 13¢ to $92.76/bbl.

Heating oil for March delivery dropped 4.38¢ to $2.99/gal on NYMEX. Reformulated stock for oxygenate blending for the same month fell 12.51¢ to $2.86/gal.

The new front-month April natural gas contract continued its decline, down 2.2¢ to $3.43/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., escalated 8¢ to $3.54/MMbtu.

In London, the April IPE contract for North Sea Brent registered further loss, down 84¢ to $111.87/bbl. Gas oil for March continued falling, down $12.50 to $944.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes maintained its downward trend, losing 41¢ to $109.69/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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