MARKET WATCH: Rising unemployment in Europe brings down oil prices

Oil prices fell Apr. 30 with crude dropping 1.1% in the New York futures market after the Euro-zone reported record high unemployment of 12.1%. There also was continued concern of possible US intervention in Syria.

In the more optimistic equity market, the Standard & Poor’s 500 Index closed at another record high after 6 months of consecutive gains. However, equity and commodity markets were down in early trading May 1 as investors awaited an announcement from Federal Reserve officials at the end of their meeting.

“After staging a sustained technical rally since Apr. 18, the upwards momentum in crude oil prices appears to have dissipated,” said Leon Westgate at Standard New York Securities Inc., the Standard Bank Group. Increased production by members of the Organization of Petroleum Exporting Countries, higher inventory levels, and weak economic data from China “appear to be the main factors hurting sentiment, with both Brent and West Texas Intermediate falling heavily heading into US trade,” he said.

US inventories

The Energy Information Administration said May 1 commercial US crude inventories jumped 6.7 million bbl to 395.3 million bbl in the week ended Apr. 26, far 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.

Imports of crude into the US increased 602,000 b/d to 8.2 million b/d last week. In the 4 weeks through Apr. 26, crude imports averaged 7.7 million b/d, down 987,000 b/d from the comparable period in 2012. Gasoline imports last week averaged 628,000 b/d; distillate fuel imports averaged 265,000 b/d.

The input of crude into US refineries increased 222,000 b/d to 14.7 million b/d last week with units operating at 84.4% of capacity. Gasoline production decreased to 8.8 million b/d. Distillate fuel production increased slightly to 4.3 million b/d.

Energy prices

The June and July contracts for benchmark US light, sweet crudes fell $1.04 each to $93.46/bbl and $93.68/bbl, respectively, Apr. 30 on the New York Mercantile Exchange. On the US spot market, WTI at Cushing, Okla., lost the same amount to the same closing price as the front-month futures contract.

Heating oil for May delivery declined 2.72¢ to $2.87/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 2.65¢ to $2.80/gal.

The June natural gas contract dropped 4.9¢ to $4.34/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., increased 1.2¢ to $4.28/MMbtu.

In London, the June IPE contract for North Sea Brent lost $1.44 to $102.37/bbl. Gas oil for May was down $11.75 to $845.75/tonne.

OPEC’s office in Vienna closed May 1, so no price update for its basket of 12 benchmark crudes is available.

Contact Sam Fletcher at samf@ogjonline.com.

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