MARKET WATCH: Oil prices rebound moderately on weaker dollar

Oil and gas prices rebounded moderately June 12 largely due to a weaker dollar, but broader markets fell with the Dow Jones Industrial Average marking “its worst losing streak of the year.”

The Dow posted a 0.8% loss during the session “after tapering fears crept back into investor minds,” said analysts in the Houston office of Raymond James & Associates Inc. “Commodity traders were a little perkier though, as West Texas Intermediate rose 0.5%” in the New York futures market despite a larger-than-expected jump in crude stockpiles. Energy stocks followed the decline in broader markets, however with the SIG Oil Exploration & Production Index and the Oil Service Index down 1% each. Crude and natural gas were lower in early trading June 13.

US inventories

The Energy Information Administration reported June 13 the injection of 95 bcf of natural gas into US underground storage in the week ended June 7, just under Wall Street’s consensus for an input of 96 bcf. Working gas in storage increased to 2.347 tcf, down 587 bcf from the comparable period a year ago and 58 bcf below the 5-year average.

EIA earlier reported commercial US crude inventories climbed 2.5 million bbl to 393.8 million bbl last week, opposite Wall Street’s consensus for a drawdown of 1.5 million bbl. Gasoline inventories escalated by 2.7 million bbl to 221.5 million bbl, 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 to 122.1 million bbl, opposite analysts’ outlook for a 1.5 million bbl gain (OGJ Online, June 12, 2013).

The latest oil inventory “was a mirror image” of the previous report, Raymond James analysts said. “While consensus was calling for a build of 500,000 bbl for ‘Big Three’ inventories, the reported increase was much higher at 4.1 million bbl.”

The sharp increase in gasoline stocks “almost offset” the unexpected draw in distillates. Moreover, Raymond James analysts said, “The impact of the ‘Big Three’ draw was compounded by significant builds in jet fuel, residual fuel, and unfinished oils, resulting in an increase of 7.8 million bbl for total petroleum stockpiles. The large build in crude was partially due to a [582,000 b/d] increase in imports week to week. Other factors were total petroleum demand, which fell 4.6%, and refinery utilization, which slipped [0.9%] to 87.5%.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “On the bright side for WTI, Cushing, Okla., inventories dropped considerably, falling 800,000 bbl.” He said implied gasoline demand fell to 9 million b/d from 9.1 million b/d, while implied crude demand dropped to 14.7 million b/d from 15.5 million b/d.

Energy prices

The July and August contracts for benchmark US sweet, light crudes recovered 50¢ to $95.88/bbl and $96.10/bbl, respectively, June 12 on the New York Mercantile Exchange.

On the US spot market, WTI at Cushing was up by the same amount to match the front-month futures closing of $95.88/bbl. Heating oil for July delivery recouped 3.77¢ to $2.90/gal on NYMEX. Reformulated stock for oxygenate blending for the same month, however, declined 1.3¢ to $2.81/gal.

The July natural gas contract bounced back by 5.3¢ to $3.78/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained 2.4¢ to $3.79/MMbtu.

In London, the July IPE contract for North Sea Brent took back 53¢ to $103.49/bbl. Gas oil for June was unchanged at $858.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes increased 17¢ to $100.89/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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