MARKET WATCH: US oil prices drop on rising inventory numbers

Crude oil prices dropped on the New York market, ending the Oct. 22 trading session at their lowest level since June 28, which analysts attributed to expectations that US petroleum and product supplies could build faster than demand.

A disappointing monthly jobs report from the US Department of Labor supported concerns about slow gasoline demand. The agency reported 148,000 job additions during September, which was well behind gains earlier in the year and which suggests employers held back on hiring even before the 16-day partial US government shutdown began Oct. 1.

Meanwhile, Brent’s premium to the front-month US benchmark oil contract was $12.17/bbl on Oct. 22, marking its biggest margin since Apr. 4.

“It’s a trade that’s really attracting some interest, and people are hopping on the Brent bandwagon and selling WTI to finance it,” Stephen Schork, editor of the Schork Report in Villanova, Pa., told Reuters in reference to West Texas Intermediate, the US benchmark light sweet crude.

The Energy Information Administration reported a jump in US crude supplies for the week ended Oct. 11. The Schork Report estimated US commercial crude oil stocks are at the third-highest level for October since 1930 and 13% above the normal range over the previous decade.

Inventory numbers

In a report released Oct. 23, EIA said US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.2 million bbl for the week ended Oct. 18 compared with the previous week.

At 379.8 million bbl, crude oil inventories are above the upper range for this time of year. Total motor gasoline inventories decreased by 1.8 million bbl and are near the top of the average range. Finished gasoline inventories and gasoline blending component inventories both decreased.

Distillate fuel inventories increased by 1.5 million bbl last week but remain near the lower limit of the average range for this time of year.

US refinery inputs averaged about 14.9 million b/d during the week ended Oct. 18, which was 2,000 b/d higher than the previous week’s average. Refineries operated at 85.9% capacity last week. Gasoline production fell from the previous week, averaging 9.1 million b/d. Distillate fuel production increased last week to just over 4.8 million b/d.

Crude oil imports averaged about 7.7 million b/d last week, down by 348,000 b/d from the previous week. Over 4 weeks, oil imports averaged 8 million b/d, 4.3% below the same 4-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 438,000 b/d, EIA said. Distillate fuel imports averaged 117,000 b/d.

Energy prices

The New York Mercantile Exchange November crude contract fell Oct. 22 by $1.42, settling at $97.80/bbl. The December contract dropped $1.38 to settle at $98.30/bbl.

Heating oil for November delivery dropped by 3.1¢ to a rounded $3/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for November fell 3.7¢ to a rounded $2.62/gal.

The November natural gas contract gave up 8.7¢ to a rounded $3.58/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La., was a rounded $3.69/MMbtu, down by 8¢.

In London, the December ICE contract for Brent crude oil rose 33¢, settling at $109.97/bbl. The November contract for ICE gas oil dropped $5 to $936.50/tonne.

The Organization of Petroleum Exporting Countries basket of 12 benchmark crudes was $106.77/bbl on Oct. 22, up 1¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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