MARKET WATCH: Oil markets negative after big drop in previous session

Oil markets generally were down Apr. 16 with front-month crude essentially flat after dropping to its lowest price of the year in the previous session on the New York market and North Sea Brent closing below $100/bbl for the first time since July.

“Oil markets struggled to move into the black after an early sell-off,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. The markets were “under attack again” in early trading Apr. 17, particularly Brent, “as participants clearly remain uncertain about the future of global demand, given the uncertainty introduced this week surrounding China’s growth prospects—the world’s second largest consumer,” he said.

The economic slowdown in the first quarter of this year “has perhaps got many thinking whether more downside is in the offing for the coming quarters. In addition, the upward trajectory of inflation adds further uncertainty,” Ground said.

US inventories

The Energy Information Administration said Apr. 17 commercial US crude inventories fell 1.2 million bbl to 387.6 million bbl in the week ended Apr. 12, opposite Wall Street’s consensus for a 1.2 million bbl gain. Gasoline stocks declined 600,000 bbl to 221.7 million bbl, short of the 800,000 bbl drop analysts expected. Finished gasoline increased while blending components decreased. Inventories of distillate fuel jumped 2.4 million bbl to 115.2 million bbl. Analysts had projected a 400,000 bbl decline.

Imports of crude into the US were down 289,000 b/d to 7.4 million b/d in that same period. In the 4 weeks through Apr. 12, US imports of crude averaged 7.8 million b/d, down 1.3 million b/d from the comparable period in 2012. Gasoline imports last week averaged 606,000 b/d while distillate fuel imports averaged 337,000 b/d.

The input of crude into US refineries was down 40,000 b/d to 15.1 million b/d last week with units operating at 86.3% of capacity. Gasoline production increased to 8.9 million b/d, while distillate fuel production decreased to 4.5 million b/d.

Energy prices

After falling to the lowest closing this year in the previous session, the May contract for benchmark US light, sweet crudes regained just 1¢ to $88.72/bbl Apr. 16 on the New York Mercantile Exchange. The June contract remained unchanged at $89.03/bbl. Subsequent monthly contracts were essentially flat through April 2014. On the US spot market, West Texas Intermediate at Cushing, Okla., matched the front-month crude futures contract’s gain of 1¢ to $88.72/bbl.

Heating oil for May delivery continued its downward trend, declining 2.27¢ to $2.81/gal on NYMEX. However, reformulated stock for oxygenate blending for the same month regained 2.42¢ to $2.78/gal.

The May natural gas contract recovered 2.3¢ to $4.16/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., ended its 4-session rally down 5.3¢ to $4.19/MMbtu.

In London, the new front-month June IPE contract for North Sea Brent traded as low as $98/bbl before closing at $99.91/bbl, down 72¢ for the day. Gas oil for May lost $11.50 to $835.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped $1.41 to $97.15/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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