MARKET WATCH: Crude overcomes slump to post modest gain

Crude futures overcame a price slump in early trading Apr. 2 in the New York market and managed modest gains by the close of the session. The natural gas contract, however, fell 1.4% on concerns cold weather will dissipate next week.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “For most of the day, West Texas Intermediate was on the back foot,” with the front-month contract retreating a little below $96/bbl at one point. Traders feared a build-up of crude inventories at Cushing, Okla., due to the shut-down of ExxonMobil Corp.’s Pegasus Pipeline from Patoka, Ill., to Nederland, Tex., following the discovery Mar. 29 of a leak near Mayflower, Ark. (OGJ Online, Apr. 2, 2013).

However, WTI recovered its earlier losses after Shell Pipeline Co. said its 170,000 b/d Eugene Island crude pipeline system off Louisiana remained shut in as repair crews continued inspections for an apparent small leak. The pipeline has been shut in more than a week, and the company does not yet know when it will restart.

In Houston, analysts at Raymond James & Associates Inc. reported, “Investor sentiment rebound with the Standard & Poor’s 500 Index up 0.5% on the session.” Contributing to that rally, Cyprus concluded its bailout deal, and the US dollar rose against the yen.

Meanwhile, political tensions between North and South Korea continued to escalate. Stock prices fell in early trading in the equity market Apr. 3 on reports of weak hiring and growth among service companies.

US inventories

The Energy Information Administration said Apr. 3 commercial US crude inventories increased by 2.7 million bbl to 388.6 million bbl in the week ended Mar. 29, surpassing the Wall Street consensus for a gain of 2.1 million bbl. Gasoline stocks declined 600,000 bbl to 220.7 million bbl, short of the 1 million bbl draw analysts expected. Both finished gasoline and blending components were down. Distillate fuel inventories fell 2.3 million bbl to 113 million bbl, exceeding the outlook for a 1.1 million bbl drop.

Imports of crude into the US last week declined by 227,000 b/d to 7.9 million b/d. In the 4 weeks through Mar. 29, US crude imports averaged 7.7 million b/d, down 1.3 million b/d from the comparable period in 2012. Gasoline imports last week averaged 595,000 b/d, and distillate fuel imports averaged 83,000 b/d.

The input of crude into US refineries increased 130,000 b/d to 15 million b/d last week with units operating at 86.3% of capacity. Gasoline production increased to 8.9 million b/d, and distillate fuel production increased to 4.3 million b/d.

Energy prices

The May and June contracts for benchmark US light, sweet crudes were down in early trading Apr. 2 on the New York Mercantile Exchange but finished the day up 12¢ each to $97.19/bbl and $97.50/bbl, respectively. On the US spot market, WTI at Cushing increased the same amount to match the May futures contract’s closing price.

Heating oil for May delivery increased 1.87¢ to $3.09/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, dropped 6.07¢ to $3.04/gal.

The May natural gas contract lost 4.6¢ to $3.97/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 1¢ to $4.05/MMbtu.

In London, the May IPE contract for North Sea Brent rose 67¢ to $110.69/bbl. Gas oil for April was up $14 to $929.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes jumped by $1.19 to $108.16/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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