MARKET WATCH: Crude prices slump as US inventory, Saudi production grow

Energy prices continued to slump June 11 with front-month crude down 0.6% in the New York market after the Organization of Petroleum Exporting Countries said it produced 30.57 million b/d in May.

“That’s a six-month high with Saudi Arabia offsetting declines from Libya and Iraq,” said analysts in the Houston office of Raymond James & Associates Inc. The front-month contract for North Sea Brent fell further as the UK’s Buzzard field came back online, “squeezing the West Texas Intermediate-Brent spread to a 2-year low,” they said. Natural gas dropped 1.8%.

Equity “markets tanked yesterday” with the Standard & Poor’s 500 Index down 1%. Raymond James reported, “The catalyst for the broad selloff was the Bank of Japan’s decision to maintain the current package of stimulus tools, rather than capitulate to market expectations for additional easing.” The SIG Oil Exploration & Production Index and the Oil Service Index were down 2.1% and 1.7%, respectively.

In its monthly oil market report June 12, Paris-based International Energy Agency “tweaked its 2013 global oil demand growth forecast down 10,000 b/d to 785,000 b/d,” Raymond James analysts said. “This is still above our demand growth forecast, which currently sits at 660,000 b/d, largely due to a more bearish outlook for the Pacific region as we anticipate the return of Japanese nuclear power toward the end of the year. Looking at supply, OPEC production rose by 135,000 b/d in May due to higher output from Saudi Arabia, Iran, and the UAE. Despite the higher OPEC supply, global supply decreased slightly by 90,000 b/d, primarily due to Canadian maintenance.”

Meanwhile, the “apparent resilience of the US consumer” and an easing of retail gasoline prices in the US due to large inventories of crude and gasoline, “may prove to be less of a constraint to WTI upside than we had originally thought,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “However, we would caution against inferring too much from the recent and abrupt pick-up in indicators of potential gasoline demand.”

With US consumer confidence rapidly improving and steady progress in the job market, he said, “It would appear that this resilience might be maintained over the summer and translate into robust gasoline demand, given relatively mild gasoline prices.”

Ground said, “Gasoline prices have come down considerably since March, with the catalyst for this correction ostensibly April’s sudden drop in oil prices. However, while the WTI price since then has regained much of what it had lost, gasoline prices have remained relatively flat. Clearly, oil price movements were only part of this correction in gasoline prices.” As long as inventories remain ample, it should limit any increase in gasoline prices even amid growing demand.

Ground said, “Growth in US crude oil production, although less of a concern now, still remains a bit of a brake on declining US crude oil inventory.”

US inventories

The Energy Information Administration said June 12 commercial US crude inventories, already above average for this time of year, climbed 2.5 million bbl to 393.8 million bbl in the week ended June 7, opposite Wall Street’s consensus for a drawdown of 1.5 million bbl. Gasoline inventories escalated by 2.7 million bbl, also above average and exceeding the market’s expectation of a 500,000 bbl gain. Both finished gasoline inventories and blending components increased last week. Distillate fuel inventories dropped 1.2 million bbl, opposite analysts’ outlook for a 1.5 million bbl gain.

Imports of crude into the US were up 582,000 b/d to 7.9 million b/d last week. In the 4 weeks through June 7, US crude imports averaged 7.8 million b/d, down 1.2 million b/d from the comparable period a year ago. Gasoline imports last week averaged 692,000 b/d while imports of distillate fuel averaged 52,000 b/d.

The input of crude into US refineries declined by 225,000 b/d to 15.2 million b/d last week with units operating at 87.5% of capacity. Gasoline production decreased to 9.2 million b/d, and distillate fuel production declined to 4.7 million b/d.

Energy prices

The July contract for benchmark US light, sweet crudes lost 30¢ to $95.38/bbl June 11 on the New York Mercantile Exchange. The August contract retreated 40¢ to $95.60/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 30¢ to $95.38/bbl.

Heating oil for July delivery declined 2.63¢ to $2.86/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 2.5¢ to $2.82/gal.

The July natural gas contract dropped 7.6¢ to $3.72/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 8.8¢ to $3.76/MMbtu.

In London, the July IPE contract for North Sea Brent was down 99¢ to $102.96/bbl. Gas oil for June lost $10.75 to $858.50/tonne.

The average price for OPEC’s basket of 12 benchmark crudes gave up 66¢ to $100.72/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


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