MARKET WATCH: Oil prices continue to waffle

Oil prices continued retreating with front-month crude down 1.4% in the New York futures market July 30 but rose at midday July 31 after the Energy Information Administration reported the first increase in US crude inventories in 5 weeks. Natural gas prices continued to slide, down 0.4% at yesterday’s close.

In equity trading, analysts in the Houston office of Raymond James & Associates Inc. reported, “The stock market was underwhelmed by President Barack Obama's tax-cut-shaped olive branch yesterday. The Standard & Poor’s 500 Index closed less than a tenth of a percent higher than where it started. This probably isn’t surprising since the two parties in Washington remain at loggerheads about how potential revenues should be spent.”

Obama proposed a corporate tax cut in exchange for more stimulus spending by the government to aid the economy. “The proposal signaled a Democratic willingness to overhaul business taxes only, with the proceeds channeled into job creation (none of which sounds strikingly dissimilar from what we've heard before),” Raymond James analysts said. Republicans on the other hand maintained any windfall should fund lower tax rates. “Nothing new there either,” analysts said. “With more debt-ceiling and budget drama on the 2013 calendar, we're hoping to see more progress than this.”

US inventories

The EIA said July 31 commercial US crude inventories increased by 400,000 bbl to 364.6 million bbl in the week ended July 26. Wall Street’s consensus was for a 2.5 million bbl draw. Gasoline inventories were up 800,000 bbl to 223.5 million bbl in the same period vs. market expectations for a 1.5 million bbl decline. Finished gasoline inventories increased while blending components decreased last week. Distillate fuel inventories dropped 500,000 bbl to 126 million bbl, opposite analysts’ predictions of a 500,000 gain.

Imports of crude into the US rose 136,000 b/d to 8.2 million b/d last week. In the 4 weeks through July 26, US crude imports averaged 7.9 million b/d, down 1 million b/d from the comparable period in 2012. Gasoline imports averaged 700,000 b/d last week, while distillate fuel imports averaged 115,000 b/d.

The input of crude into US refineries declined 66,000 b/d to 16 million b/d last week with units operating at 91.3% of capacity. Gasoline production increased to 9.5 million b/d, and distillate fuel production decreased to 4.8 million b/d.

Energy prices

The September contract for benchmark US light, sweet crudes fell $1.47 to $103.08/bbl July 30 on the New York Mercantile Exchange. The October contract dropped $1.40 to $102.50/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.47 to $103.08/bbl.

Heating oil for August delivery dipped 0.95¢ to $3.01/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.6¢ to $3.02/gal.

The new front-month September natural gas contract lost 4¢ to $3.43/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 1.5¢ to $3.46/MMbtu.

In London, the September IPE contract for North Sea Brent was down 54¢ to $106.91/bbl. Gas oil for August decreased $5.75 to $908/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes dropped 29¢ to $104.92/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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