MARKET WATCH: Brent crude prices continue to rise on Iraqi insurgency

Crude oil futures prices on the New York market fell modestly on June 24 awaiting weekly inventory numbers while crude oil prices rose again on the London market, which analysts attributed to ongoing instability in Iraq.

Stephen Schork of The Schork Report said US oil prices also fell because traders are anticipating the price difference between the New York Mercantile Exchange and Brent contracts will widen. He said it’s a common practice for traders to buy one benchmark oil contract and sell another.

The spread between Brent and light, sweet US crude benchmarks widened to more than $8/bbl in June 24 settlements. Both contracts have traded near 9-month highs in the last 2 weeks upon reports of insurgency in Iraq.

“With any sort of fear premium that’s getting priced in, you’re going to see that reflected in the spread moving out,” Schork said. “You’re just seeing a lot of money flowing into the spreads.”

But the NYMEX-Brent price gap was getting narrower against in June 25 trading upon news that the US Department of Commerce agreed to allow two companies to sell condensate to foreign buyers starting in August.

DOC issued what it calls a private ruling saying Enterprise Products Partners LP and Pioneer Natural Resources Co. could sell condensate from the Eagle Ford in South Texas to foreign buyers.

Separately, the Wall Street Journal reported that its survey indicated analysts expected the weekly Energy Information Administration petroleum report would show the US oil inventory fell by 1.2 million bbl for the week ended June 20.

But the inventory report actually showed a gain. EIA reported commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 1.7 million bbl from the previous week. At 388.1 million bbl, US crude oil inventories are in the upper half of the average range for this time of year, EIA said.

EIA inventory report

Total motor gasoline inventories increased by 700,000 bbl last week, and are in the middle of the average range, EIA said. Finished gasoline inventories decreased while blending components inventories increased.

Distillate fuel inventories increased by 1.2 million bbl and are near the lower limit of the average range for this time of year. Propane-propylene inventories rose 2.4 million bbl, and EIA said that level was the upper half of the average range.

US refinery inputs averaged 15.7 million b/d for the week ended June 20, which was 275,000 b/d more than the previous week’s average. Refineries operated at 88.5% of capacity last week.

Gasoline production decreased last week, averaging about 9.1 million b/d. Distillate fuel production increased, averaging 4.9 million b/d.

US crude oil imports averaged over 7.3 million b/d, up by 107,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged over 7.2 million b/d. Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 507,000 b/d. Distillate fuel imports averaged 83,000 b/d last week.

Energy prices

The NYMEX August crude oil contract price dropped 14¢ on June 24 to close at $106.03/bbl. The September contract fell 10¢ to $105.32/bbl.

The natural gas contract for July rose 8.9¢ to a rounded $4.54/MMbtu. On the US cash market, gas at Henry Hub, La., was $4.49/MMbtu, up 1¢.

Heating oil for July delivery climbed by slightly less than 1¢ to a rounded $3.04/gal. Reformulated gasoline stock for oxygenate blending for July delivery also rose, climbing 1.8¢ to settle at a rounded $3.13/gal.

The August ICE contract for Brent crude delivery gained 34¢, closing at $114.56/bbl. The September contract rose 31¢ to $114.03/bbl. The ICE gas oil contract for July increased $7.25 to $936/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for June 24 was $109.62, down 68¢.

Contact Paula Dittrick at paulad@ogjonline.com.

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