MARKET WATCH: Oil, gas prices slip lower

Oil prices declined June 10 with front-month crude down 0.3% in the New York futures market following reports China’s oil imports have dropped 6%. Front-month natural gas lost 0.7% on forecasts for milder weather and anticipation the government will report June 13 a big build in gas inventory.

The Oil Service Index and the SIG Oil Exploration & Production Index both traded flat, as did Standard & Poor’s 500 Index. Equity market prices increased briefly in early trading June 10 after S&P raised its outlook for US government debt to “stable” from “negative,” citing an improving economy. But all major US indexes declined shortly after.

Equity markets and crude prices were down in early trading June 11 with a sell-off in Treasury bonds amid continued concerns the Federal Reserve Bank may soon pare back stimulus spending. Overseas markets fell overnight with the Japanese stock market dropping 1.5% after Japan’s central bank took no new measures to stabilize government bonds. European markets also were down.

OPEC outlook

In its latest monthly report released June 11, the Organization of Petroleum Exporting Countries’ demand forecast for its crude this year is unchanged at 29.8 million b/d from its previous prediction, down 400,000 b/d from 2012.

OPEC’s basket of 12 benchmark crudes averaged $100.65/bbl in May, down 40¢/bbl from April. So far this year, the basket price is down $9.75/bbl, or 8.4%, from the comparable period a year ago. “While the Middle Eastern spot-related crudes fell the most, the Latin American grades improved,” OPEC reported.

The price for benchmark US light crude futures rose sharply in May as the inventory overhang in the Midwest eased and macroeconomic data indicated a gradual improvement in the US economy. “In contrast, the ICE Brent contract was affected by the persistently weak economic outlook in Europe, as well as poor Chinese economic growth, amid improving crude oil supplies,” OPEC reported. West Texas Intermediate increased $2.73 to an average $94.80/bbl in May while Brent slipped 15¢ to an average $103.28/bbl.

OPEC ministers expect world oil demand to increase 800,000 b/d in 2013, in line with last year’s growth rate. Oil demand among member nations of the Organization for Economic Cooperation and Development is expected to decline by 400,000 b/d this year, “a slight improvement over 2012,” OPEC said. But non-OECD consumption is projected to grow 1.2 million b/d, slightly less than last year. China is likely to continue to grow 400,000 b/d, the Middle East up 300,000 b/d, and other Asia regions and Latin America each increasing 200,000 b/d, said OPEC officials.

Non-OPEC oil supply is projected to increase by 1 million b/d in 2013, supported by strong increase in US output. OPEC crude production averaged 30.57 million b/d in May, up 106,000 b/d from April. OPEC NGL and nonconventional oils are expected to average 5.9 million b/d this year, up 200,000 b/d from last year.

Energy prices

The July contract for benchmark US sweet, light crudes slipped 26¢ to $95.77/bbl June 10 on the New York Mercantile Exchange. The August contract declined 27¢ to $96/bbl. On the US spot market, WTI at Cushing, Okla., was down 26¢ to $95.77/bbl.

Heating oil for July delivery decreased 0.93¢ to $2.88/gal on NYMEX. Online price data for reformulated stock for oxygenate blending for the same month was too garbled to report.

The July natural gas contract lost $2.8¢ to $3.80/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 7.9¢ to $3.85/MMbtu.

In London, the July IPE contract for North Sea Brent dropped 61¢ to $103.95/bbl. Gas oil for June fell $6 to $869.25/tonne.

The average price for OPEC’s basket of 12 benchmark crudes declined 26¢ to $101.38/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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