MARKET WATCH: Low inventory boosts crude in New York market

The front-month crude contract continued rising in the New York futures market, up 0.5% Apr. 10 after the Energy Information Administration reported a smaller-than-expected inventory increase “despite a 900,000 bbl build at Cushing, Okla., and a large, unexpected build in gasoline,” said analysts in the Houston office of Raymond James & Associates Inc.

Equity markets also were up on “strong Chinese economic data,” they said, with the Dow Jones Industrial Average gaining 1%. The Oil Service Index and SIG Oil Exploration & Production Index followed the broader market, up 1.5% and 0.8%, respectively.

US inventories

The EIA reported Apr. 11 the withdrawal of 14 bcf of natural gas from US underground storage in the week ended Apr. 5, exceeding Wall Street’s consensus for a 13 bcf pull. That left 1.673 tcf of working gas in storage, down 804 bcf from the comparable period a year ago and 66 bcf below the 5-year average.

EIA earlier said commercial US crude inventories inched up 300,000 bbl to 388.9 million bbl last week, short of Wall Street’s consensus for a 1.5 million bbl gain. Gasoline stocks climbed 1.7 million bbl to 222.4 million bbl in the same period, opposite analysts’ expectations of a 1.5 million bbl withdrawal. Finished gasoline inventories decreased while blending components increased. Distillate fuel stocks dipped 200,000 bbl to 112.8 million bbl last week; the market forecast a 1.5 million bbl drop (OGJ Online, Apr. 10, 2013).

The 1.88 million bbl overall increase in the “Big Three” inventories of crude, gasoline, and distillate fuels “was a mirror image of consensus expectations for a draw of almost the same magnitude,” said Raymond James. “The surprise build was driven by gasoline, which unexpectedly increased for the first time in 9 weeks, while the crude and distillate changes essentially offset one another. Substantial increases in residual fuel oil and unfinished oil inventories added to the ‘Big Three’ build, resulting in a larger increase in total petroleum.”

They noted, “Refinery utilization is currently at the highest level since early November (86.8%), which probably prevented a larger increase in crude stocks. However, Cushing inventories surged back above 50 million bbl for the first time in 5 weeks and are currently 9.5 million bbl higher than this time last year.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “The build in gasoline inventories and Cushing crude oil stocks is concerning. We have pointed out before that, while there is room for increased distillate production (stockpiles are currently extremely low) to help alleviate the upward momentum in crude oil inventories, gasoline inventories are largely in line with their seasonal 5-year average.”

He added, “Bakken light tight oil and Canadian oil sands production continues to escalate, especially as we move into the northern hemisphere spring (as a number of wells have been idled over the winter), which could keep upward momentum in crude oil inventories in place.”

Energy prices

The May contract for benchmark US sweet, light crudes increased 44¢ to $94.64/bbl Apr. 10 on the New York Mercantile Exchange. The June contract gained 46¢ to $94.97/bbl. On the US spot market, West Texas Intermediate at Cushing was up 44¢ to $94.64/bbl.

Heating oil for May delivery declined 1.34¢ to $2.95/gal on NYMEX. Reformulated stock for oxygenate blending for the same month fell 7.73¢ to $2.87/gal, wiping out much of its gains in the previous two sessions

The May natural gas contract recouped 6.8¢ to $4.09/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., recovered 4¢ to $4.10/MMbtu.

In London, the May IPE contract for North Sea Brent lost 44¢ to $105.79/bbl. Gas oil for April was up $6.50 to $885/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes continued its rally, up 54¢ to $103.26/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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