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

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

Survey begins of collaboration on the UKCS

06/30/2015

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

MARKET WATCH: NYMEX, Brent crude oil prices slump on Greek default fears

06/30/2015 US light, sweet crude oil futures and Brent crude oil futures for August delivery each settled down by more than $1/bbl on June 29, with Brent slid...

Group suggests principles for Alberta royalty review

06/29/2015 The Canadian Association of Petroleum Producers (CAPP) has suggested that four principles guide Alberta in an oil and gas royalty review planned by...

MARKET WATCH: NYMEX crude oil for August hovers below $60/bbl

06/29/2015 US crude oil futures for August delivery settled below $60/bbl on the New York market June 26 as tensions mounted about Greece, which ordered lende...

MARKET WATCH: NYMEX crude oil for August falls below $60/bbl

06/26/2015 US crude oil futures for August delivery settled below $60/bbl on the New York market June 25, and prices continued declining in early June 26 trad...

Gas faces more competition from coal, renewables, IEA official says

06/25/2015 Natural gas faces growing competition from coal and renewable energy sources at a time when its potential demand growth is slowing down, an Interna...

MARKET WATCH: NYMEX prices drop on higher gasoline inventories

06/25/2015 US crude oil futures for August delivery dropped modestly on June 24 after analysts were surprised by a weekly increase in product inventories, esp...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

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