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

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
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


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


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

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