MARKET WATCH: Crude makes small gains; products, gas prices continue slipping

Crude prices made small gains on a weaker dollar July 25 with the front-month US benchmark contract up 0.1% in the New York futures market, but petroleum products and natural gas prices continued to retreat.

“Natural gas futures declined 1.5% as traders weighed a lower injection number against cooler temperatures forecast in the coming weeks,” said analysts in the Houston office of Raymond James & Associates Inc. Energy stocks were mixed with the Oil Service Index losing 0.4% and the SIG Oil Exploration & Production Index gaining 1.6%. Crude and gas commodities prices were lower in early trading July 26.

The Energy Information Administration reported the injection of 41 bcf of natural gas into US underground storage in the week ended July 19, less than Wall Street’s consensus for an addition of 46 bcf. That raised working gas in storage to 2.786 tcf, down 399 bcf from the comparable period in 2012 and 46 bcf below the 5-year average (OGJ Online, July 25, 2013).

Raymond James analysts said, “Excluding weather-related demand, there was 1.4 bcfd of additional natural gas added to storage [last] week compared with last year, and we have averaged 3.2 bcfd looser over the past 4 weeks.”

WTI-Brent spread

The price spread between North Sea Brent and West Texas Intermediate benchmark crudes rapidly narrowed last week with WTI briefly trading at a premium to Brent in the July 19 and July 22 sessions. It has widened some this week but is still at a historic low.

The recent contraction was “the final push in a persistent narrowing of the spread since December” primarily due to the strengthening of WTI, said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. From its low point in December, front-month WTI has climbed 22.9% while front-month Brent remained largely unchanged.

Amid lackluster demand and growing domestic production, crude inventories at Cushing, Okla., the delivery point for WTI contracts, rose steadily through 2012, becoming “a constant drag on WTI prices,” Ground said. But by mid-December, prices began to retreat with the expanded Seaway Pipeline scheduled to open in January, transporting more oil from the Cushing bottleneck to Gulf Coast refineries. This started the steady climb of WTI prices and consequently the narrowing of the Brent-WTI spread.

After the pipeline opened, initial work down of Cushing crude stocks was “rather lackluster.” However, Ground said, “On the approach of the US driving season, the pace of drawdowns intensified amid increased refinery runs. This pushed WTI ever higher, as market participants grew increasingly optimistic about the US consumer and the outlook for gasoline demand, bringing us to this point where the spread is at its lowest level since early-2010.”

Nonetheless, he said, “We remain skeptical that the spread can continue to narrow and doubt the sustainably of a nearly closed spread.”

He said, “While recent consumer confidence readings do point to a much stronger consumer, we must be aware of the dependence of these readings on gasoline prices and the self-limiting dynamic between demand and prices. Part of the strength in consumer confidence since April is owed to the step lower in gasoline prices during that month. As gasoline demand grows, this will invariably put upward pressure on prices (although, as we have already mentioned, this might be limited by ample gasoline inventories), dampening consumer confidence and crimping gasoline demand. In addition, recent economic data flow has also pointed to a slowing down of consumer spending.”

Meanwhile US crude production has resumed its previous upward trend, possibly putting a brake on declines in US crude oil inventory. “Therefore, to the extent that recent buoyancy in WTI relative to Brent reflects an extrapolation of recent trends in consumer and inventory data (and the inference drawn from this about US gasoline demand over the US driving season), we feel that such buoyancy may be overdone,” Ground concluded.

Energy prices

The September contract for benchmark US light, sweet crudes regained 10¢ to $105.49/bbl July 25 on the New York Mercantile Exchange. The October contract recovered 37¢ to $104.47/bbl. On the US spot market, WTI at Cushing, Okla., remained in step with the front-month futures contract, up 10¢ to $105.49/bbl.

Heating oil for August delivery declined 1.2¢ to $3.04/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 3.78¢ to $3.02/gal.

The August natural gas contract dropped 5.4¢ to $3.64/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., fell 5.5¢ to $3.65/MMbtu.

In London, the September IPE contract for North Sea Brent took back 46¢ to $107.65/bbl. Gas oil for August lost 50¢ to $913.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes continued its decline, down 16¢ to $105.28/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

Senate passes Defense bill with BLM drilling permit program provision

12/15/2014 The US Senate approved a Department of Defense appropriations bill on Dec. 13 containing a provision extending and making permanent a drilling perm...

Cook to head DONG Energy E&P group

12/15/2014 David B. Cook has been named group executive vice-president and chief executive officer for exploration and production at DONG Energy, Fredericia, ...

Sunshine Oilsands appoints chief executive officer

12/15/2014

Sunshine Oilsands Ltd., Calgary, has appointed Luo Hong as chief executive officer and Jiang Qi as president and chief operating officer.

Woodside to buy Apache’s interests in Wheatstone, Kitimat LNG for $2.75 billion

12/15/2014 Woodside Petroleum Ltd. has agreed to acquire interest in the Wheatstone LNG and Kitimat LNG projects, respectively in Western Australia and Britis...

MARKET WATCH: OPEC basket price closes below $59/bbl

12/15/2014 The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while cru...

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

White Papers

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...

Accurate Thermo-Fluid Simulation in Real Time Environments

The crux of any task undertaken in System Level Thermo-Fluid Analysis is striking a balance between ti...

6 ways for Energy, Chemical and Oil and Gas Companies to Avert the Impending Workforce Crisis

As many as half of the skilled workers in energy, chemical and oil & gas industries are quickly he...
Sponsored by

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Available Webcasts



The Future of US Refining

When 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


Oil & Gas Journal’s Forecast & Review/Worldwide Pipeline Construction 2015

When Fri, Jan 30, 2015

The  Forecast & Review/Worldwide Pipeline Construction 2015 Webcast will address Oil & Gas Journal’s outlooks for the oil market and pipeline construction in a year of turbulence. Based on two annual special reports, the webcast will be presented by OGJ Editor Bob Tippee and OGJ Managing Editor-Technology Chris Smith.
The Forecast & Review portion of the webcast will identify forces underlying the collapse in crude oil prices and assess prospects for changes essential to recovery—all in the context of geopolitical pressures buffeting the market.

register:WEBCAST



On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


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