MARKET WATCH: Crude prices increase despite bearish inventory report

Crude prices increased modestly in mixed markets June 26 with the front-month contract up 0.2% in the New York futures market despite a bearish government report of US inventories.

US gasoline stocks last week escalated to the highest level for this time of the year in 2 decades, said analysts in the Houston office of Raymond James & Associates Inc. “Energy stocks tracked the crude bump,” they said, with the SIG Oil Exploration & Production Index inching up 0.2% and the Oil Service Index rising 0.4%.

In the broader markets, Raymond James analysts said, “Bad news actually calmed jitters, giving the Dow Jones Industrial Average a triple-digit boost.” Crude and market futures were trending higher in early trading June 27, but natural gas was down.

“Bouts of renewed dollar strength and concerns over Chinese banking liquidity have both been an intermittent drag on oil prices over the past few days,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. On June 26, he said, “The confluence of these forces pushed the front-month West Texas Intermediate price as low as $93.70/bbl and brought front-month Brent to as low as $100.20/bbl.”

But despite these drags, Ground said, “Both benchmarks have been able to make steady gains each day this week, which is also an indication of this week’s volatility in oil prices. Ostensibly, the reason for these gains has been that oil market participants have instead viewed this week’s encouraging data flow out of the US through a positive–for-demand lens, rather than as a negative due to increased chances of the Federal Reserve Bank tapering [its economic stimulation program]. This perhaps implies that the market has grown more comfortable with and more certain about the possibility of the Fed’s tapering and less concerned about the dampening effect this might have on speculative activity.”

Trimming back the Fed’s quantitative easing program “might also dampen the enthusiasm of the speculative market, although we feel that investor interest could be maintained if tapering is accompanied by an improving crude oil demand outlook,” he said.

Strengthening of the US dollar through the Fed’s tapering “still appears to loom large in the markets thinking, and, to our mind, rightly so,” Ground reported. “We view the dollar’s reaction (and the related reaction in interest rates) to a paring in Fed bond purchases as a major downside risk to our price forecasts over the coming quarter.”

US inventories

The Energy Information Administration reported June 27 the injection of 95 bcf of natural gas into US underground storage in the week ended June 21, exceeding Wall Street’s consensus for an increase of 89 bcf. That brought working gas in storage to 2.533 tcf, down 522 bcf from the comparable period a year ago and 31 Bcf below the 5-year average.

EIA earlier reported commercial US crude inventories remained essentially unchanged at 394.1 million bbl in the week ended June 21, still above average for the time of year. Gasoline inventories climbed 3.7 million bbl to 225.4 million bbl in the same period, well above average. Blending components increased last week while finished gasoline inventories were unchanged. Distillate fuel inventories increased 1.6 million bbl to 123.2 million bbl (OGJ Online, June 26, 2013).

Ground said, “Crude oil inventories disappointed by climbing a paltry 18,000 bbl, compared to an expectation of a 1.8 million bbl drawdown.” Gasoline stocks jumped much higher than the 900,000 bbl analysts expected.

“These disappointments appear to have been overshadowed by sustained increases in implied demand for crude oil and gasoline, as well as another rise in refinery utilization rates,” Ground said. “We are still confident that robust gasoline demand over the coming months could see a working down of both gasoline and ultimately crude oil inventories in the US. However, we do feel that market participants might still be overestimating this work-down of inventories if they simply extrapolate recent trends.”

Total petroleum inventories climbed even higher than the combined gains of crude, gasoline, and distillate fuel, “driven mainly by an uptick in residual fuel oil,” said Raymond James analysts. “Total petroleum product demand was 3% higher this week, following last week's 2.8% increase. Meanwhile, Cushing, Okla., inventories increased 700,000 bbl to 49.3 million bbl following 3 consecutive weeks of declines and are 1.8 million bbl higher than this time last year.”

Energy prices

The August contract for benchmark US sweet, light crudes rose 18¢ to $95.50/bbl June 26 on the New York Mercantile Exchange. The September contract increased 20¢ to $95.41/bbl. On the US spot market, WTI at Cushing was up 18¢ to $95.50/bbl.

Heating oil for July delivery retreated 0.41¢ to $2.85/gal on NYMEX. Reformulated stock for oxygenate blending for the same month declined 0.68¢ to $2.73/gal.

The July natural gas contract regained 6¢ to $3.71/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., continued falling, down 3.9¢ to $3.73/MMbtu.

In London, the August IPE contract for North Sea Brent gained 40¢ to $101.66/bbl. Gas oil for July dropped $7.75 to $863.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 40¢ to $99.39/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...

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...

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...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...

BP trims capital budget by $4-6 billion

02/03/2015 BP PLC plans an organic capital expenditure of $20 billion in 2015, down from the previous guidance $24-26 billion. Total organic capital expenditu...

IHS sees second-half end of US output surge

02/03/2015

Expectations are moderating about growth of oil production in the US this year.

White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

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...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



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


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