MARKET WATCH: Crude prices surge in New York market on bullish inventory report

Oil prices escalated July 10 with front-month crude up 2.9% in the New York futures market following a bullish government report of an unexpected surge in commercial US inventory last week.

“Oil rose on both sides of the Atlantic despite news that Chinese imports of crude declined to their lowest level in 9 months,” said analysts in the Houston office of Raymond James & Associates Inc. North Sea Brent inched up 0.4% “on higher demand forecasts made by the Organization of Petroleum Exporting Countries, dropping the West Texas Intermediate-Brent spread to less than $3, its lowest level since 2010.”

Meanwhile, the benchmark 10-year Treasury note yield dropped to 2.59% July 10 from 2.63% as reassured investors began buying bonds after Federal Reserve Chairman Ben Bernanke said the central bank will continue its economic stimulus program. The equity market racked up some record highs in early trading July 11, with all 10 industry groups on the rise in Standard & Poor's 500 Index.

Market outlook

The US boom in tight oil production is reducing demand for OPEC crude and stimulating a steady increase in spare capacity over the next few years, “increasing the oil market’s ability to absorb supply shocks and undermining the group’s influence over market balances and price,” said Barclays Capital Commodities Research analysts. But as long as global demand maintains a modest seasonal upswing, OPEC in the second half of this year will not have to cut production much from recent levels of 30.5 million b/d, they said.

Barclays Capital analysts have reduced their Brent price forecast to $105/bbl in the fourth quarter from a previous estimate of $114/bbl. “Although we caution against overestimating the impact of US tight oil in bringing down global oil prices and still expect long-term averages to remain comfortably above $100/bbl,” they said, “the extra supply now looks likely to cap oil price upside further ahead, and we have cut roughly $20/bbl from our 2014 and 2015 forecasts, which for Brent now stand at $110[/bbl] and $115[/bbl] respectively.”

Moreover, they said, “We have also revised up our forecasts for WTI relative to Brent. The market has recently priced in both better US Midwest refinery demand and expanding pipeline capacity to shift US crude to Gulf Coast refineries. We now think the Brent-WTI differential will fluctuate around the $4-5/bbl level until yearend, though we expect conditions to support a modest ‘rewidening’ of the spread in 2014.”

US inventories

The Energy Information Administration reported July 11 the injection of 82 bcf of natural gas into US underground storage in the week ended July 5, in line with the Wall Street consensus. This increased working gas in storage to 2.687 tcf, down 443 bcf from the comparable period a year ago and 22 bcf below the 5-year average.

EIA earlier said commercial US crude inventories fell 9.9 million bbl to 373.9 million bbl last week, which included the US Independence Day holiday. That far exceeded Wall Street’s consensus for a 3.2 million bbl draw. Gasoline stocks dropped 2.6 million bbl to 221 million bbl in the same period, opposite market expectations of a 1 million bbl build. Inventories of finished gasoline increased while blending components decreased. Distillate fuel inventories jumped 3 million bbl to 123.8 million bbl last week, well above the anticipated 1 million bbl increase in that category.

“Crude inventories have fallen by 20.2 million bbl in the [previous] 2 weeks. The decline in total petroleum inventories was even larger than the decrease in the ‘Big Three’ [of crude, gasoline, and distillates] at 11.5 million bbl, with jet fuel, residual fuel oil, and unfinished oil inventories all declining week-over-week,” Raymond James analysts said. “However, it’s worth noting that total inventories are still up by 21 million bbl (2.4%) from year-ago levels. The large crude drawdown came amid continuing high refinery utilization (92.4%), while crude imports were flattish at 7.5 million b/d. Despite the draw, total petroleum demand was 1.2 million b/d (5.7%) lower [last] week, following [the previous] week’s 7.5% increase. Cushing, Okla., inventories decreased after 2 weeks of increases, declining 2.7 million bbl to 47 million bbl.

Energy prices

The August contract for benchmark US sweet, light crudes jumped $2.99 to $106.52/bbl July 10 on the New York Mercantile Exchange. The September contract escalated $2.31 to $105.62/bbl. On the US spot market, WTI at Cushing kept in step with the August futures contract, up $2.99 to $106.52/bbl.

Heating oil for August delivery increased 1.6¢ to $3/gal on NYMEX. Reformulated stock for oxygenate blending for the same month pulled ahead by 8.89¢ to $3.01/gal.

The August natural gas contract reclaimed 2.3¢ to $3.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., inched up 0.7¢ to $3.70/MMbtu.

In London, the August IPE contract for Brent advanced 70¢ to $108.51/bbl. Gas oil for July regained $4.50 to $913.75/tonne.

The average price for OPEC’s basket of 12 benchmark crudes rose 63¢ to $104.69 bbl.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

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...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

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

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


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


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

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