MARKET WATCH: NYMEX oil prices jump pending Fed decision, inventory report

Crude oil futures prices jumped on New York and London markets in Jan. 28 trading, and analysts said the US market fluctuated awaiting a decision from Federal Reserve officials regarding whether they would accelerate the tapering of an economic stimulus program.

The US Energy Information Administration said commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 6.4 million bbl for the week ended Jan. 24 compared with the week ended Jan. 17.

The latest EIA report, released Jan. 29, estimated US crude oil inventories at 357.6 million bbl, which is in the upper half of the average range for this time of year. Separately, the American Petroleum Institute said its estimate showed crude oil inventories rose by 4.7 million bbl for the week ended Jan. 24.

The futures price spread between US light, sweet crude oil and Brent for March delivery narrowed to $10 on Jan. 28. Brent prices have been higher for months, and $10 marked the narrowest gap in settlement prices since mid-November 2013.

Iraqi oil Minister Abdul Kareem Luaiby told reporters on Jan. 28 that Iraq is negotiating for sharp cuts in production targets with major Western oil companies regarding some of Iraq’s largest oil fields.

Hussain al-Shahristani, Iraq’s deputy prime minister for energy, told reporters Iraq is drafting proposals regarding a possible return of the production quota system for the Organization of Petroleum Exporting Countries.

Speaking at a conference hosted by Chatham House in London, OPEC’s secretary general said OPEC will be able to handle anticipated oil volumes from Iran, Iraq, and Libya.

“We will accommodate them, and OPEC will be as before,” Abdullah al-Badri told reporters in London, saying OPEC members can prevent oversupply issues. “We’ve faced a lot of difficulties in the past, and we were able to overcome them, and this we will overcome.”

Regarding US oil prices, analysts and traders awaited a statement from the Jan. 29 conclusion of the Fed’s policy meeting. The Fed’s Open Market Committee evaluated the pace of tapering an economic stimulus program. Previously, the Fed reduced its bond-buying program to $75 billion/month from $85 billion/month.

Another reduction would strengthen the US dollar, which analysts say would pressure oil prices by making it more expensive for oil buyers using other currencies to buy oil denominated in dollars.

Distillate stocks drop

As anticipated given winter storms, EIA said US distillate fuel inventories decreased by 4.6 million bbl last week and are well below the lower limit of the average range for this time of year. Propane-propylene inventories fell 3.6 million bbl last week and are well below the lower limit of the average range.

Total motor gasoline inventories decreased by 800,000 bbl, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased, EIA said.

US refinery inputs averaged over 15.4 million b/d for the week ended Jan. 24, which was an increase of 201,000 b/d from the previous week’s average. Refineries operated at 88.2% of capacity last week. Gasoline production increased last week, averaging 9.2 million b/d. Distillate fuel production increased last week, averaging over 4.8 million b/d.

Crude oil imports averaged over 8 million b/d last week, up by 504,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged over 7.6 million b/d, which was 5.4% below the same period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 466,000 b/d, EIA said. Distillate fuel imports averaged 317,000 b/d last week.

Energy prices

The New York Mercantile Exchange March crude contract gained $1.69 on Jan. 28, closing at $97.41/bbl. The April contract climbed $1.60 to settle at $96.96/bbl.

Heating oil for February delivery rose 2.94¢ to a rounded $3.12/gal. Reformulated gasoline stock for oxygenate blending for February delivery edged up 0.61¢ to a rounded $2.63/gal.

The February natural gas contract on NYMEX rose 18.6¢ to a rounded $5.03/MMbtu. On the US spot market, the gas price at Henry Hub declined by 51¢ to $5.24/MMbtu.

In London, the March ICE contract for Brent crude delivery gained 72¢, closing at $107.41/bbl as the April contract jumped by 83¢ to $106.86/bbl. The ICE gas oil contract for February was up $3 to $917.50/tonne.

The Organizational of Petroleum Exporting Countries reported its basket of 12 benchmark crudes climbed by 5¢ to $104.67/bbl.

Contact Paula Dittrick at paulad@ogjonline.com.

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