MARKET WATCH: Inventory surprises boost oil prices

A smaller-than-expected crude inventory increase and a large drop in gasoline stocks boosted oil prices Apr. 24 with the front-month crude contract climbing 2.5% in the New York futures market. Natural gas fell 1.5%, however.

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “The Brent-West Texas Intermediate spread closed at $10.30/bbl — the lowest level since early 2012.”

Oil markets overnight got an additional lift from better-than-expected first quarter gross domestic product data out of South Korea—“one of the world’s top 10 crude oil consumers,” Ground noted.

“We should caution on getting too optimistic about the prospect of oil demand from this country, since growth was largely premised on an export recovery [that] is unlikely to continue,” he said. “In addition, Asian oil demand prospects will remain constrained by a more subdued Chinese growth trajectory than many had been expecting.”

The oil market was “relatively lackluster” in early trading Apr. 24 due to earlier disappointing data on the US Purchasing Managers Index. But it bounced back after the Energy Information Administration said commercial US crude inventories increased 900,000 bbl to 388.6 million bbl in the week ended Apr. 19, below Wall Street’s consensus for a 2 million bbl gain. Gasoline stocks fell 3.9 million bbl to 217.8 million bbl in the same period, far exceeding analyst’s expectations of a 600,000 bbl decline. Both finished gasoline inventories and blending components inventories were down. On the other hand, distillate fuel inventories were up 100,000 bbl to 115.3 million bbl, short of the market’s outlook for a 500,000 bbl addition (OGJ Online, Apr. 24, 2013).

“The steep decline in ‘Big Three’ inventories [crude, gasoline, distillate fuels] of 2.9 million bbl was in sharp contrast to the consensus forecast for [an overall] build of 1.9 million bbl,” said analysts in the Houston office of Raymond James & Associates Inc. “The smaller-than-expected build in crude stocks was clearly a contributing factor, but the main driver was the magnitude of the decrease in gasoline inventories.” The operating capacity of US refineries was down 2.8% to 83.5% last week, offsetting a moderate increase in crude imports. 

Crude inventories at Cushing, Okla., “edged higher for the third week in a row (to 51.2 million bbl) and are currently 9.4 million bbl higher than this time last year. Total petroleum demand was up 0.8% [last] week after rising 1.9% the prior week,” Raymond James analysts said.

EIA reported Apr. 25 the injection of 30 bcf of natural gas into US underground storage in the week ended Apr. 19, below Wall Street’s consensus for 32 bcf input. That brought working gas in storage to 1.734 tcf, down 807 bcf from the comparable period a year ago and 94 bcf below the 5-year average.

In other news, 339,000 applications for unemployment benefits were filed in the US last week, down 16,000 from the previous week to the second-smallest increase in more than 5 years. The US unemployment rate dropped to a 4-year low of 7.6% in March, primarily because more people have given up looking for work and dropped off government rolls. As of Apr. 6, the latest data available, more than 5 million US residents were collecting unemployment benefits.

Energy prices

The June contract for benchmark US sweet, light crudes rebound by $2.25 to $91.43/bbl Apr. 24 on the New York Mercantile Exchange. The July contract regained $2.23 to $91.69/bbl. On the US spot market, WTI at Cushing was up $2.25 to $91.43/bbl.

Heating oil for May delivery gained 2.96¢ to $2.84/gal on NYMEX. Reformulated stock for oxygenate blending for the same month increased 2.84¢ to $2.75/gal.

The May natural gas contract, however, dropped 7.2¢ to $4.17/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 1.4¢ to $4.28/MMbtu.

In London, the June IPE contract for North Sea Brent rose $1.42 to $101.22/bbl. Gas oil for May increased $8 to $847.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.44 to $98.96/bbl.

Contact Sam Fletcher at samf@ogjonline.com

 

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