MARKET WATCH: Oil futures fall as US government shutdown threatens crude demand

Benchmark light, sweet crude oil futures prices fell Oct. 1 for a third consecutive trading session on the New York market amid rising concerns that a partial US government shutdown could reduce crude demand.

Both Democrats and Republicans were quoted in the media on Oct. 2 saying resolution of an impasse on the federal budget could take weeks. Meanwhile, White House and lawmakers planned more talks Oct. 2 in efforts to break a stalemate that closed some agencies.

House Republicans were trying to devise a piecemeal strategy of financing government operations going into December. Meanwhile, analysts suggested the budget impasses could reduce oil demand because hundreds of thousands of federal employees might go without pay for an undetermined period.

Natural gas prices on Oct. 1 reached their highest level on NYMEX since Sept. 20. The upward momentum was expected to continue as forecasters watched a system likely to enter the Gulf of Mexico. The National Hurricane Center said a low-pressure area has 40% chance of forming into a tropical cyclone. The system was expected to reach the southern gulf by Oct. 3.

The US Energy Information Administration’s weekly inventory report came out as scheduled Oct. 2 and was expected to do the same on Oct. 9 regardless of a government shutdown. Crude oil stockpiles built more than analysts had expected.

Crude inventory builds

The American Petroleum Institute said its information showed crude stockpiles increased 4.5 million bbl last week. EIA’s inventory report, meanwhile, said US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased 5.5 million bbl for the week ended Sept. 27 compared with the previous week. At 363.7 million bbl, crude inventories are toward the upper range for this time of year.

Total motor gasoline inventories increased 3.5 million bbl and are at the top of the average range. Finished gasoline and gasoline blending component inventories both increased. Distillate fuel inventories decreased 1.7 million bbl and remain near the lower limit of the average range for this time of year. Propane-propylene inventories increased 1.6 million bbl, which is middle of the average range.

US refinery inputs averaged 15.4 million b/d for the week ended Sept. 27, which was 146,000 b/d lower than the previous week’s average. Refineries operated at 89% of capacity. Gasoline production fell, averaging 8.9 million b/d. Distillate fuel production rose to about 4.9 million b/d.

EIA said crude oil imports averaged 8.4 million b/d last week, up 438,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged just under 8 million b/d, which was down 6.5% from the same 4-week period last year.

Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 559,000 b/d. Distillate fuel imports averaged 85,000 b/d last week.

Energy prices

The NYMEX November contract for benchmark US light, sweet crudes fell 29¢ on Oct. 1, settling at $102.04/bbl. During the trading session, the November contract dipped briefly to $101.06/bbl but rebounded. The December crude contract dropped 21¢ to settle at $101.69/bbl.

Heating oil for October delivery was down 1.6¢ to a rounded $2.95/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for October lost 1.76¢ to $2.61/gal, marking its lowest settlement price for 2013.

The November natural gas contract climbed 4.9¢ to a rounded $3.61/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La., was $3.58/MMbtu, up 6.2¢.

In London, the November IPE contract for North Sea Brent crude dropped 43¢ to $107.94/bbl. The October contract for gas oil dropped $7.75 to $905.25/tonne.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes declined 19¢ to $105.42/bbl on Oct. 1.

Contact Paula Dittrick at paulad@ogjonline.com.

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