MARKET WATCH: Crude prices slip lower in New York futures market

The front-month US benchmark crude contract continued to waffle, retreating 0.1% June 4 in the New York futures market. “But while domestic crude lost momentum, Brent rose on supply concerns as several oil-producing nations continued to witness rising violence,” reported analysts in the Houston office of Raymond James & Associates Inc.

In the equity market, they said, “As investor sentiment soured, the Dow Jones Industrial Average broke a 20-week win streak that baffled technical analysts and made it the best day of the week for bulls this year. The loss continued to underscore the market's perception that the Federal Reserve Bank could scale back its quantitative easing program—a fear that highlights the fragility of the US economy.” The Standard & Poor’s 500 Index was down 0.6% on June 4.

Meanwhile, a scandal over falsified maintenance reports has taken some nuclear power plants offline in South Korea, driving up Asian spot cargo demand for LNG, said analysts with PIRA Energy Group in New York.

“Adding to an already booming gas demand surge in South Korea this year, another two large-scale nuclear power plants have recently been taken offline for up to 4 months,” PIRA analysts reported. “The nuclear problems, which actually emerged last October, will also delay the restart of two other nuclear power units.”

US inventories

The Energy Information Administration said June 5 commercial US crude inventories fell 6.3 million bbl to 391.3 million in the week ended May 31, far below Wall Street’s expectation of a modest decline of 800,000 bbl. Yet crude stocks remain above average for this time of year, EIA said. Gasoline inventories decreased 400,000 bbl to 218.8 million bbl, opposite analysts’ consensus for a 1 million bbl increase. Finished gasoline stocks rose while blending components declined. Distillate fuel inventories climbed 2.6 million bbl to 123.3 million bbl, outstripping the market’s outlook for a 1.4 million bbl gain.

Imports of crude into the US were down 549,000 b/d to 7.3 million b/d last week. In the 4 weeks through May 31, US crude imports exceeded 7.7 million b/d, down 1.2 million b/d from the comparable period a year ago. Gasoline imports last week averaged 514,000 b/d; distillate fuel imports averaged 143,000 b/d.

The input of crude into US refineries increased by 433,000 b/d to 15.5 million b/d last week with units operating at 88.4% of capacity. Gasoline production increased to 9.3 million b/d, and distillate fuel production was up by 4.8 million b/d.

Energy prices

The July contract for benchmark US light, sweet crudes declined 14¢ to $93.31/bbl June 4 on the New York Mercantile Exchange. The August contract slipped 12¢ to $93.55/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was in tandem with the front-month futures contract, down 14¢ to $93.31/bbl.

Heating oil for July delivery, on the other hand, increased 3.15¢ to $2.86/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 3.31¢ to $2.82/gal.

For the second consecutive session, the July natural gas contract inched up 0.7¢, enough to cross the $4/MMbtu threshold on NYMEX. On the US spot market, however, gas at Henry Hub, La., dipped 0.5¢ but closed essentially unchanged, also at a rounded $4/MMbtu.

In London, the July IPE contract for North Sea Brent gained $1.18 to $103.24/bbl. Gas oil for June advanced by $3.50 to $857.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 99¢ to $99.87/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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