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

Deloitte studies oil supply growth for 2015-16

02/16/2015 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...

MARKET WATCH: NYMEX crude oil price jumps more than $2/bbl

02/13/2015 Crude oil prices on the New York market jumped by more than $2/bbl Feb. 12 to settle above $51/bbl, which analysts attributed to more oil and gas c...

Apache’s 2015 capital budget less than half of last year’s $8.5 billion

02/12/2015 Apache Corp., Houston, plans a capital budget of $3.6-4 billion in 2015, with $2.1-2.3 billion directed toward onshore North America and $1.5-1.7 b...

Total reduces budget by 10% to $23-24 billion

02/12/2015 Total SA plans to lower its organic investments to $23-24 billion in 2015 from $26.4 billion in 2014 by reducing spending in brownfield development...

MARKET WATCH: NYMEX crude prices drop back below $50/bbl

02/12/2015 The New York Mercantile Exchange March crude oil contract dropped $1.18 on Feb. 11, closing at $48.84/bbl. The April contract dropped $1.15 to $50....

US House vote sends Keystone XL approval bill to Obama’s desk

02/12/2015 The US House of Representatives voted by 270 to 152 to pass S. 1, which would deem the proposed Keystone XL crude oil pipeline approved more than 6...

TransCanada challenges EPA’s comments on Keystone XL SEIS

02/11/2015 TransCanada Corp. responded to the Feb. 2 comment letter from the US Environmental Protection Agency on the US Department of State’s final suppleme...

PNR cuts capital spending nearly in half

02/11/2015 Pioneer Natural Resources Co. (PNR), Dallas, plans to spend $1.85 billion in 2015 following a fourth quarter in which the company reported a net in...

PACE survey finds 69% support for crude exports to trading partners

02/11/2015 More than two thirds of registered voters responding in a nationwide telephone survey commissioned by Producers for American Crude Exports (PACE) s...
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


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

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

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


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


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