MARKET WATCH: Bearish inventory, economy drop oil prices

Oil prices dropped sharply May 1 with the front-month crude contract down 2.6% in the New York futures market after federal officials reported oil inventories at the highest level since 1982.

In addition, Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “Oil markets were hammered by disappointing data flow out of China, losing considerable ground.” North Sea Brent closed just below $110/bbl, narrowing the price spread between Brent and West Texas Intermediate to “a relatively tight” $8.92/bbl.

In Houston, analysts at Raymond James & Associates Inc. said, “Broader markets fell after several disappointing economic data points, sending all 10 sectors in the Standard & Poor’s 500 Index lower. The headlines included a weak private jobs report and Chinese manufacturing data.”

Federal Reserve Chairman Ben Bernanke “granted little relief to investors after it was announced, again, that monthly monetary easing would continue for now,” they said. Natural gas was down modestly, and the SIG Oil Exploration & Production Index and the Oil Service Index declined 2% and 1%, respectively.

Bernanke reiterated the Fed will keep its key short-term interest rate near zero until US unemployment falls to 6.5% or inflation exceeds 2.5% a year. It also will continue its quantitative easing policy that has already injected $2.5 trillion into the economy since December 2008. The Labor Department said May 2 the unemployment rate is unchanged at 7.6%.

US inventories

The Energy Information Administration reported the injection of 43 bcf of natural gas into US underground storage in the week ended Apr. 26, far above Wall Street’s consensus for an addition of 29 bcf. That raised working gas in storage to 1.777 tcf, which is 795 bcf below the year-ago level and 118 bcf below the 5-year average.

EIA earlier said commercial US crude inventories jumped 6.7 million bbl to 395.3 million bbl last week, well above Wall Street‘s consensus for an increase of 1.1 million bbl. Gasoline stocks dropped 1.8 million bbl to 216 million bbl, surpassing the 900,000 decline analysts expected. Both finished gasoline and blending components were down. Distillate fuel inventories were up 500,000 bbl to 115.8 million bbl, above market projections of a 300,000 bbl rise (OGJ Online, May 1, 2013).

“The disparity between a crude oil build and a gasoline drawdown [pulled] the market in opposing directions,” Ground said. “While the drop in gasoline stocks is an encouraging sign, we are still concerned that both the level of current gasoline stocks and in terms of days of supply are still above their 5-year averages; this could imply a limit on the extent to which refineries will draw down crude oil stocks to bolster gasoline inventories.”

Raymond James analyst noted, “The increase in ‘Big Three’ inventories of 5.4 million bbl was far larger than the consensus forecast for a build of 500,000 bbl” as “higher imports and lower demand outweighed better refinery utilization.” They said, “Total petroleum inventories built even more given the increases in jet fuel, residual fuel oil, and unfinished oils.”

However, Ground said, “At least Cushing, Okla., inventories continue to be worked down (1.4 million bbl this past week), although the pace of this work-down has been rather erratic.”

Energy prices

The June contract for benchmark US sweet, light crudes dropped $2.43 to $91.03/bbl May 1 on the New York Mercantile Exchange. The July contract fell $2.44 to $9124/bbl.

On the US spot market, WTI at Cushing also was down $2.43 to $91.03/bbl.

The new front-month June contract for heating oil decreased 5.07¢ to $2.79/gal on NYMEX. Reformulated stock for oxygenate blending for the same month declined 8.27¢ to $2.72/gal.

The June natural gas contract was down 1.7¢ to $4.33/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., gained 3.8¢ to $4.32/MMbtu.

In London, the June IPE contract for North Sea Brent lost $2.42 to $99.95/bbl. Gas oil for May fell $23 to $822.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes retreated 68¢ to $99.97/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Senators’ bill aims to curb flaring by expediting permit process

02/09/2015 North Dakota and Wyoming’s US senators introduced legislation that aims to capture methane and reduce flaring by expediting procedures for obtainin...

USW union workers add two BP refineries to strike list

02/09/2015 Union workers at two BP PLC-owned refineries in Indiana and Ohio have joined the United Steelworkers union’s (USW) unfair labor practice (ULP) stri...

Bendine elected as Petrobras’ chief executive officer

02/09/2015

The board of Petroleo Brasileiro SA (Petrobras) has approved the election of Alde Mir Bendine as the company’s chief executive officer.

Central starts gas sales from Palm Valley field

02/09/2015 Central Petroleum Ltd., Brisbane, is to start sale of early natural gas from Palm Valley field to Northern Territory Power & Water Corp. under ...

Association presidents want more access in next 5-year OCS plan

02/09/2015 The presidents of three major US oil and gas trade associations urged the US Bureau of Ocean Energy Management to keep more of the US Outer Contine...

MARKET WATCH: NYMEX oil prices settle above $51/bbl

02/09/2015 Crude oil prices rose on the New York market Feb. 6 to settle above $51/bbl after the Baker Hughes Inc. weekly rig count showed a decline of 87 rig...

Statoil reduces capital budget by $2 billion following 4Q losses

02/06/2015 Statoil ASA has reduced its organic capital expenditure to $18 billion in 2015 from $20 billion in 2014. The move comes on the heels of a fourth qu...

Chinese regulators approve Sinopec’s plan for grassroots refinery

02/06/2015 China’s National Development and Reform Commission (NDRC) has approved Sinopec Beijing Yanshan Petrochemical Co. Ltd., a subsidiary of China Nation...

BOEM schedules public meetings about draft proposed 5-year OCS plan

02/06/2015 The US Bureau of Ocean Energy Management will hold the first of 20 public meetings in Washington on Feb. 9 to receive public comments on potential ...
White Papers

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected