MARKET WATCH: NYMEX crude oil prices fall on US oil supply build

Crude oil futures prices fell slightly on the New York market during Jan. 29 trading after a government report showed the largest weekly crude oil supply gain in more than 3 months (OGJ Online, Jan. 29, 2013).

Meanwhile, the Federal Reserve announced plans to make another reduction in its economic stimulus program.

Monthly bond purchases will be $65 billion/month starting in February, down from a pace of $75 billion/month, the Fed said in a Jan. 29 statement ending a 2-day committee meeting. The stimulus program has boosted oil prices by weakening the dollar, making oil cheaper to buy with foreign currencies.

Meanwhile, analyst and traders appeared to be focused primarily on the US Energy Information Administration inventory report that oil inventories rose by 6.4 million bbl to 357.6 million bbl for week ended Jan. 24. The report marked the weekly supply increase since the week ended Oct. 4.

EIA estimated natural gas in underground storage at 2.193 tcf as of Jan. 24, a net decline of 230 bcf from the previous week.

The weekly gas storage report showed stocks were 637 bcf lower than at the same time last year and 437 bcf below the 5-year average of 2.63 tcf.

Hans van Cleef, analyst with ABN AMRO Group in Amsterdam, increased his 2014 forecast for Brent crude oil prices to an average $100/bbl, up $5/bbl from his initial forecast.

“Nevertheless, we expect that the declining trend will continue in the following years,” he said of Brent prices in an ABN AMRO quarterly commodity outlook.

“Mainly due to US inventory building, the Brent-West Texas Intermediate spread widened. Since an unwinding of the risk premium will have a bigger impact on Brent, we expect the Brent-WTI spread to narrow to $5/bbl in the course of the year,” he said.

Regarding natural gas prices, ABN AMRO forecast US gas prices will rally “after an initial correction lower” to average toward $4/MMbtu for the first quarter. “As a result, the price difference between Europe and the US should narrow further,” the latest outlook said.

Van Cleef expects easing seasonal gas demand will result in lower US gas prices. He believes high gas demand will continue as long as extremely cold temperatures sweep across the East Coast, Midwest, and reach into the southern US.

“If weather conditions improve, stocks can be rebuilt, and some long positions will be closed,” he said. “It is therefore likely that corrections will lower US natural gas prices. The amount of pressure on prices will depend on how long it takes for inventories to return to normal levels. Until then, natural gas prices could remain high, especially on rumors that demand could pick up again.”

Energy prices

The New York Mercantile Exchange March crude contract settled 5¢ lower, closing at $97.36/bbl on Jan. 29. The April contract declined 8¢ to settle at $96.88/bbl.

Heating oil for February delivery rose 5.98¢ to a rounded $3.18/gal. Reformulated gasoline stock for oxygenate blending for February delivery gained 3.3¢ to a rounded $2.66/gal.

The February natural gas contract on NYMEX rose 52.4¢ to a rounded $5.56/MMbtu. On the US spot market, the gas price at Henry Hub declined 3.4¢ to a rounded $5.20/MMbtu.

In London, the March ICE contract for Brent crude delivery gained 44¢, closing at $107.85/bbl, and the April contract climbed 38¢ to $107.24/bbl. The ICE gas oil contract for February was up $6.25 to $923.75/tonne.

The Organizational of Petroleum Exporting Countries reported its basket of 12 benchmark crudes declined 10¢ to $104.57/bbl on Jan. 29.

Contact Paula Dittrick at paulad@ogjonline.com.

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