MARKET WATCH: WTI-Brent spread at 18-month low with marginal price advances

Crude prices advanced marginally in mixed energy markets June 25 with the West Texas Intermediate-North Sea Brent spread dropping to an 18-month low of $5.94/bbl. Natural gas prices continued to fall.

“Energy traders essentially shrugged off President Barack Obama's ‘War on Carbon’ yesterday, which is not too surprising given that his speech earned lots of enthusiasm points but was a little light on impactful policy changes, carbon regulation of power plants notwithstanding,” said analysts in the Houston office of Raymond James & Associates Inc. “Instead, traders focused on US durable goods orders, which ratcheted up 3.2% in May, surpassing analyst expectations and signaling a hunky-dory domestic economy.”

They reported, “Equities jumped on the healthy economy bandwagon, with the Standard & Poor’s 500 Index advancing 1%.” The SIG Oil Exploration & Production Index rose 2.1% while the Oil Service Index increased 1.3%.

Raymond James analysts dismissed Obama's climate policy as a “piecemeal plan that reflects legislative gridlock . . . consisting purely of incremental regulatory steps that do not require congressional action. In other words, no carbon tax, no cap-and-trade, and no renewable portfolio standard at the federal level.”

The “more actionable” provisions include carbon regulation of power plants, more renewables on federal lands, loan guarantees for cleaner fossil fuels, and boosting fuel economy standards. “The rest of the two dozen or so provisions are either too minor to matter or are simply restatements of existing policies,” they said.

US inventories

The Energy Information Administration said June 26 commercial US crude inventories remained 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.

Imports of crude into the US dropped 138,000 b/d to 8.3 million b/d last week. In the 4 weeks through June 21, crude imports have averaged 8 million b/d, down 1.2 million b/d from the comparable period a year ago. Gasoline imports last week averaged 937,000 b/d while distillate fuel imports averaged 92,000 b/d.

The input of crude into US refineries increased by 173,000 b/d to 15.7 million b/d with units operating at 90.2% of capacity last week. Gasoline production increased to 9.1 million b/d, and distillate fuel production increased to 4.9 million b/d.

Energy prices

The August contract for benchmark US light, sweet crudes increased 14¢ to $95.32/bbl June 25 on the New York Mercantile Exchange. The September contract advanced 17¢ to $95.21/bbl. On the US spot market, WTI at Cushing, Okla., kept in step with the front-month crude futures contract, up 14¢ to $95.32/bbl.

Heating oil for July delivery inched up 0.37¢ to $2.86/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.02¢ but closed essentially unchanged at a rounded $2.74/gal.

The July natural gas contract dropped 9.2¢ to $3.65/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5.5¢ to $3.77/MMbtu.

In London, the August IPE contract for Brent was up 10¢ to $101.26/bbl. Gas oil for July escalated $14.75 to $871.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes climbed $1.40 to $99.79/bbl.

Contact Sam Fletcher at samf@ogjonline.com

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