MARKET WATCH: Uncertain economy pulls down oil prices

Crude prices continued falling but at a faster pace May 22, down 2% in the New York futures market on disappointing inventories, a stronger dollar, and lackluster progress in the US economy.

In testimony before Congress, Federal Reserve Chairman Ben Bernanke said it is too soon to change policy with the job market still weak and unemployment still too high at 7.5%, despite moderate economic growth. “Despite talk of cutting back on Fed monetary accommodation, there was not any particularly strong statement that the health of the US economy was improving,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

Broader markets also closed lower because of mixed signals regarding the Fed’s economy stimulus program. “Energy stocks followed suit, with the SIG Oil Exploration & Production Index and the Oil Service Index falling 1.5% and 2%, respectively, feeling the weight of a crude selloff,” said analysts in the Houston office of Raymond James & Associates Inc.

Oil prices were down in early trading May 23 with the overnight release of disappointing Flash Purchasing Managers Index data for China, which slipped below the 50 threshold indicating contraction. Ground said, “The potential for significant upside in Chinese economic activity is compressed. This, taken together with an ample supply picture, in our view tempers oil’s potential for upside, even when taking into consideration strengthening US demand.”

US inventories

The Energy Information Administration reported May 23 the injection of 89 bcf of natural gas into US underground storage in the week ended May 17, well below Wall Street’s consensus for 92 bcf input. It increased working gas in storage to 2.053 tcf, down 680 bcf from year-ago level and 84 bcf below the 5-year average.

EIA earlier reported commercial US crude inventories declined 300,000 bbl to 394.6 million bbl last week, short of the Wall Street consensus for a 1 million bbl draw. Gasoline stocks jumped by 3 million bbl to 220.7 million bbl in the same period, compared with analysts’ expectations of a 300,000 bbl decrease. Both finished gasoline inventories and blending components increased. Distillate fuel inventories fell 1.1 million bbl to 118.8 million bbl, opposite the market outlook for a 1 million bbl build (OGJ Online, May 22, 2013).

“‘Big Three’ inventories had a large build (whereas a draw was expected), driven by gasoline inventories,” Raymond James analysts said. “Despite the build in gasoline inventories, gasoline demand rebound by 5.4% from [the previous] week, while distillate demand was up 18%.” Total petroleum imports were 10.4 million b/d, up from 9.6 million b/d the previous week. The US refinery utilization rate dipped to 87.3% from 88% previously.

Crude inventory at Cushing, Okla., continued rising, up 400,000 bbl last week. “Most disappointing,” Ground said, was the “massive build” in gasoline inventories, “even higher than the previous week’s build.” He said, “Both the level of current gasoline stocks and in terms of days of supply are still well above their 5-year averages—this could imply a limit on the extent to which refineries will drawdown crude oil stocks to bolster gasoline inventories.”

Energy prices

The new front-month July contract for benchmark US sweet, light crudes fell $1.90 to $94.28/bbl May 22 on the New York Mercantile Exchange. The August contract dropped $1.86 to $94.46/bbl. On the US spot market, West Texas Intermediate at Cushing was down $1.88 to match the front-month futures closing of $94.28/bbl.

Heating oil for June delivery decreased 5.54¢ to $2.87/gal on NYMEX. Reformulated stock for oxygenate blending for the same month declined 2.64¢ to $2.82/gal.

The June natural gas contract dipped 0.6¢ but closed essentially unchanged at a rounded $4.19/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 2¢ to $4.16/MMbtu.

In London, the July IPE contract for North Sea Brent lost $1.31 to $102.60/bbl. Gas oil for June fell $9 to $866.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was down $1.03 to $100.36/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Oil-price collapse may aggravate producing nations’ other problems

02/05/2015 The recent global crude-oil price plunge could be aggravating underlying problems in Mexico, Colombia, and other Western Hemisphere producing natio...

Goodlatte reintroduces bills to repeal, reform RFS

02/05/2015 Calling it “a true ‘kitchen table’ issue,” US Rep. Bob Goodlatte (R-Va.) reintroduced a pair of bills to address problems in the federal Renewable ...

MARKET WATCH: NYMEX oil drops, ending 4-day rally

02/05/2015 Crude oil prices dropped on the New York market Feb. 4 to settle below $50/bbl and to end a 4-day rally after a weekly government report showed oil...

Alberta’s premier seeks more North American energy integration

02/05/2015 Better policy integration and cooperation will be needed for Canada, Mexico, and the US to fully realize the North American energy renaissance’s po...

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

Oil, gas infrastructure investments essential, House panel told

02/04/2015 Investments in oil and gas transportation and storage should move ahead because they are essential in continuing the US economic recovery and North...

Petrobras CEO, five other senior executives resign

02/04/2015 Maria das Gracas Foster, chief executive officer of Petroleo Brasileiro SA (Petrobras) since 2012, has resigned along with five other senior execut...

MARKET WATCH: NYMEX crude oil prices reach 2015 high

02/04/2015 Crude oil prices surged more than $3/bbl on the New York market Feb. 3, closing at the highest level so far this year, but some analysts believe th...

Chevron unit farms into Mauritania offshore blocks

02/04/2015 Chevron Mauritania Exploration Ltd., a wholly owned subsidiary of Chevron Corp., has agreed to acquire 30% nonoperated working interest in Blocks C...
White Papers

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

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by
Available Webcasts

On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

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