MARKET WATCH: Crude prices decline; Brent-WTI spread narrows

The front-month benchmark crude contract dipped 0.1% Mar. 13 in the New York futures market following a mixed report on oil inventories, but natural gas increased 1%.

In London, North Sea Brent registered its biggest loss in almost 3 weeks, dropping to its lowest price so far this year. As a result, the spread between Brent and West Texas Intermediate continued to narrow, down to $16/bbl—“also a closing low for the year,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

In other news, the US Department of Labor reported a seasonally adjusted 332,000 new applications for unemployment benefits last week, down 10,000 from the previous week. Some 5.6 million US residents were receiving unemployment benefits in the week ended Feb. 23, the latest period for available data. That was up 220,000 from the previous week.

US inventories

The Energy Information Administration reported Mar. 14 the withdrawal of 145 bcf of natural gas from US underground storage during the week ended Mar. 8, exceeding Wall Street’s consensus for a 137 bcf pull. That left 1.938 tcf of working gas in storage, down 440 bcf from the year-ago level but 198 bcf above the 5-year average.

EIA earlier said commercial US crude inventories increased 2.6 million bbl to 384 million bbl in the same period, up from the Wall Street consensus for a 2.3 million bbl build and with total inventory well above average for this time of year. Gasoline stocks fell 3.6 million bbl to 224.3 million bbl in the same period, far exceeding analysts’ expectations of a 1.2 million bbl draw. Both finished gasoline and blending components were down. Distillate fuel inventories inched up 100,000 bbl to 120.4 million bbl as opposed to a market outlook for a 2 million bbl drop (OGJ Online, Mar. 13, 2013).

The latest update of oil inventories was “relatively neutral,” Raymond James analysts said. “While the overall draw in ‘Big Three’ inventories [the combination of crude, gasoline, and distillate fuel] was spot on consensus estimates, the build in crude was larger than expected, though it was offset by a large gasoline draw. Jet fuel and residual fuel oil inventories also decreased, offsetting the build in unfinished oils. Additionally, refinery utilization fell [to] 81%,” they said.

Ground noted, “Cushing, Okla., inventories fell a massive 1.5 million bbl; however, we would question the persistence of this trend given the continued disappointing off-take from the Seaway Pipeline.”

Energy prices

The April contract for benchmark US sweet, light crudes traded at $91.91-93.40/bbl Mar. 13 before closing at $92.52/bbl, down just 2¢ for the day on the New York Mercantile Exchange. The May contract dipped 4¢ $92.88/bbl. On the US spot market, WTI at Cushing followed the front-month futures contract’s performance, down 2¢ to $92.52/bbl.

Heating oil for April delivery declined 2.42¢ to $2.92/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 0.79¢ to $3.14/gal.

The April natural gas contract rose 3.5¢ to $3.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 1.4¢ to $3.72/MMbtu.

In London, the April IPE contract for Brent dropped $1.13 to $108.52/bbl. The new front-month April contract for gas oil fell $11.75 to $912.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 46¢ to $106.05/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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