MARKET WATCH: NYMEX crude oil futures drop below $100/bbl

Crude oil futures dropped by more than $1/bbl on the New York market and dipped by more than $2/bbl on the London market on Apr. 1 following the release of a report that Chinese manufacturing was slowing, which triggered concerns about world oil demand, analysts said.

The HSBC China Manufacturing Purchasing Managers Index (PMI) fell to 48 for March compared with 48.5 for February. It was the third consecutive monthly drop, and HSBC China PMI’s lowest number since July 2013.

The latest HSBC China PMI was lower than an official one released by China’s statistics authority, which reported 50.3 for March compared with 50.2 for February. A reading above 50 indicates accelerated manufacturing.

Meanwhile, Brent crude oil prices continued to slump during early Apr. 2 trading upon reports that Libyan rebels could end a blockade of eastern Libyan oil terminals within days. The resumption of exports from those terminals could allow more oil to reach world markets.

US light, sweet crude prices dropped below $100/bbl Apr. 1 in anticipation of a weekly government report that showed a decline in the oil inventory. Analysts had forecast an increase in oil supplies, saying that seasonal refinery maintenance continues to reduce demand.

But the US Energy Information Administration said crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 2.4 million bbl for the week ended Mar. 28 compared with the previous week. This was the first estimated decline in the crude inventory in 11 weeks.

At 380.1 million bbl, US crude oil inventories are in the upper half of the average range for this time of year, EIA said in its weekly petroleum report.

Analysts polled by the Wall Street Journal said they expected the inventory would rise by 700,000 bbl for the week ended Mar. 28 although estimates varied widely because of uncertainty about the effect of the Houston Ship Channel being closed for during Mar. 22-25 (OGJ Online, Mar. 24, 2014).

The ship channel was closed temporary for cleanup efforts followed a fuel oil spill from a barge.

The American Petroleum Institute estimated that crude oil supplies fell by 5.8 million bbl. EIA’s estimated crude inventories as of Mar. 21 were at the highest level since November 2013.

Gasoline inventories drop

Total motor gasoline inventories decreased by 1.6 million bbl for the week ended Mar. 28, which EIA said was below the lower limit of the average range. Both finished gasoline inventories and blending components inventories decreased.

Distillate fuel inventories increased by 600,000 bbl last week but are at the lower limit of the average range for this time of year. Propane-propylene inventories increased 900,000 bbl last week and are near the lower limit of the average range.

Refinery inputs averaged over 15.3 million b/d during the week ended Mar. 28, which was 223,000 b/d more than the previous week’s average. Refineries operated at 87.7% of capacity last week.

Gasoline production increased, averaging over 9 million b/d. Distillate fuel production increased last week, averaging 4.8 million b/d.

Crude oil imports averaged over 6.8 million b/d last week, down by 786,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged about 7.3 million b/d, 6.1% below the same 4-week period last year.

Total motor gasoline imports, including finished gasoline and gasoline blending components, averaged 533,000 b/d while distillate fuel imports averaged 240,000 b/d for the week ended Mar. 28.

Energy prices

The New York Mercantile Exchange May crude oil contract was down $1.84 on Apr. 1, closing at $99.74/bbl. The June contract dropped $1.77/bbl for a settlement of $99.05/bbl.

The May natural gas contract declined 9.5¢ to a rounded $4.28/MMbtu. On the cash gas market, the Henry Hub price for Apr. 1 was unavailable.

Heating oil for May delivery dropped 4.2¢ to reach a rounded $2.89/gal. Reformulated gasoline stock for oxygenate blending for May delivery was down 4.8¢ to a rounded $2.87/gal.

In London, the May ICE contract for Brent crude delivery declined $2.14/bbl, closing at $105.62/bbl. The June contract dropped $2.09 to $105.56/bbl. The ICE gas oil contract for April declined $1 to $893/tonne.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes was $103.25/bbl on Apr. 1, down 83¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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