MARKET WATCH: NYMEX oil futures retreat on high inventory numbers

Oil futures prices fell in Apr. 30 trading on the New York market after the US Energy Information Administration issued its weekly inventory report showing crude oil supplies at the highest level since EIA started issuing weekly inventory reports in 1982.

Analysts attributed part of the inventory build to seasonal maintenance for refineries.

EIA reported the oil inventory rose by 1.7 million bbl to 399.4 million bbl for the week ended Apr. 25 (OGJ Online, Apr. 30, 2014).

On May 1, EIA released its weekly report on natural gas in underground storage, showing a net increase.

Working gas in storage was 981 bcf as of Apr. 25, EIA estimated, marking an increase of 82 bcf from the previous week. Gas storage levels were 790 bcf less than last year at this time and 984 bcf below the 5-year average of 1.965 tcf.

Hans van Cleef, senior energy economist for ABN AMRO in Amsterdam, expects world oil prices will remain relatively stable despite increased geopolitical tensions such as the Russia-Ukraine conflict.

He believes the Organization of Petroleum Exporting Countries will keep the cartel’s production at about 30 million b/d.

“That is why the role of Saudi Arabia will be important over the next few years,” van Cleef said. “If all oil producers are at maximum production capacity, it will be Saudi Arabia—the only swing producer—that will be managing the overproduction. Saudi Arabia is willing and able to lower oil production, if necessary.”

Separately, Barclays Capital Inc. issued a note saying its analysts expect oil market fundamentals will strengthen during the third quarter.

“With non-OPEC supply growth likely to slow in the second half, and global demand growth strengthening on better economic prospects, the window for lower crude oil prices is closing,” said Bayclays analyst Kevin Norrish in London.

Barclays expects Brent will average $108.80/bbl for 2014 while US light, sweet crude will average $100.50/bbl for the year.

“Although the outlook for flat prices is now relatively stable, we expect further volatility in the Brent-WTI spread,” Norrish said. The front-month gap between the benchmark crudes was $8.33/bbl as of Apr. 30 with Brent maintaining its role as the highest of the two.

Energy prices

The New York Mercantile Exchange June crude oil contract price declined $1.54, closing at $99.74/bbl on Apr. 30. The July contract was down $1.48 to $99.11/bbl.

The June natural gas contract edged down 1.6¢ to a rounded $4.82/MMbtu. Analysts said the price drop came upon forecasts calling for warmer temperatures in the Midwest than previously expected.

Heating oil for May delivery decreased 3.52¢ to a rounded $2.93/gal. Reformulated gasoline stock for oxygenate blending for May delivery was down a 5.57¢ to a rounded $3.01/gal.

In London, the June ICE contract for Brent crude delivery dropped 91¢, closing at $108.07/bbl. The July contract also dropped 91¢ to close at $107.53/bbl. The ICE gas oil contract for May was down $17 to $903.25/tonne.

The Apr. 30 price was unavailable for the OPEC basket of 12 benchmark crudes because the OPEC Secretariat office was closed May 1.

Contact Paula Dittrick at paulad@ogjonline.com.

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