MARKET WATCH: Oil declines, gas rises in quiet market

Oil prices fell in quiet trading Feb. 13 with crude ending a 2-day recovery in the New York market despite a bullish inventory report, while natural gas more than recovered its loss from the previous session.

Market reaction to US President Barack Obama’s State of the Union speech remained tepid in early trading Feb. 14, with traders reacting more to the decline in Germany’s economy. The German market is the largest in Europe; its decline will undercut European recovery, demand for energy, and sales by US companies.

Market response to State of the Union presentations historically is lackluster, moving markets less than 1% maximum and averaging just 0.15%. However, traders also took little notice in early trading when the US Department of Labor reported 341,000 new applications for unemployment benefits last week, 27,000 less than the previous week and the fewest new applications in 3 weeks. More than 5.9 million people received unemployment benefits in the week ended Jan. 26, the latest data available.

Meanwhile, the US Department of Commerce reported US retail sales inched up a meager 0.1% in January due to less disposable income among consumers because of increased payroll taxes.

US inventories

The Energy Information Administration reported Feb. 14 the withdrawal of 157 bcf of natural gas from US underground storage in the week ended Feb. 8, less than Wall Street’s consensus for a 166 bcf take. That left 2.527 tcf of working gas in storage, down 270 bcf from the year-ago level but 348 bcf above the 5-year average.

EIA earlier reported commercial US crude inventories increased just 600,000 bbl to 372.2 million bbl in that same week, well below the Wall Street consensus for a 2.2 million bbl gain. Gasoline stocks dropped 800,000 bbl to 233.2 million bbl contrary to analysts’ expectations of a 500,000 bbl increase. Finished gasoline inventories increased while blending components decreased. Distillate fuel inventories fell 3.7 million bbl to 125.9 million bbl in the same period, more than double the anticipated 1.8 million bbl decrease (OGJ Online, Feb. 13, 2013).

Raymond James analysts said, “The sizable draw in ‘Big Three’ [total crude, gasoline, and distillate fuel] inventories was in contrast to consensus estimates of a modest build. A small build in crude was more than offset by draws in both distillates and gasoline. Other petroleum products had a small build, mainly coming from residual fuel oils. The US refinery utilization rate was 83.8%, down from 84.2% last week.”

Energy prices

The March contract for benchmark US sweet, light crudes dropped 50¢ to $97.01/bbl Feb. 13 on the New York Mercantile Exchange. The April contract declined 47¢ to $97.60/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 50¢ to $97.01/bbl.

Heating oil for March delivery lost 1.74¢ to $3.22/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 1.49¢ to $3.04/gal.

The March natural gas contract recovered 7.6¢ to $3.31/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., retreated 2.2¢ to $3.29/MMbtu.

In London, the March IPE contract for North Sea Brent increased 6¢ to $118.72/bbl. The new front-month March contract for gas oil rose $2.50 to $1,011/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes gained 64¢ to $114.94/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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