MARKET WATCH: Iraqi refinery fire likely to move oil futures

Crude oil futures hovered around $106/bbl on the New York market June 17 awaiting a weekly US government inventory report while international oil markets remained focused on instability in Iraq where militants attacked a refinery.

Iraq’s Oil Ministry officials confirmed to reporters that parts of Iraq’s largest refinery at Baiji were ablaze June 18. The fire was ignited when Sunni militants seized control of part of the refinery while fighting government troops.

The 310,000-b/d hydroskimming and hydrocracking refinery is in Salahudin province, 200 km north of Baghdad. Baiji refinery has been the scene of violence and at least one attack-related fire previously. Years ago, fighters believed to belong to al-Qaeda were suspected in an attack and fire (OGJ Online, Jan. 8, 2008).

Details were not immediately available regarding what units at the refinery were on fire. FACTS Global Energy analyst Cuneyt Kazokoglu in London told the Wall Street Journal that the Baiji refinery attack and fire had no immediate price effect in early June 18 futures trading.

Kazokoglu believes Iraqi gasoline and diesel imports likely could increase if the refinery were to be closed.

Sunni militants have moved on several northern Iraqi cities and towns recently.

US President Barack Obama has ruled out immediate air strikes by US military on Sunni militants moving toward Baghdad. Hundreds of militants representing the Islamic State of Iraq and al-Sham (ISIS) oppose the Shiite-dominated government of Iraqi Prime Minister Nour al-Maliki.

Meanwhile, Shiite militias reportedly are mobilizing in support of the Iraqi government.

Meanwhile, the US Energy Information Administration estimated commercial crude oil inventories, excluding the Strategic Petroleum Reserve, decreased by 600,000 bbl for the week ended June 13 from the previous week.

At 386.3 million bbl, US crude oil inventories are in the upper half of the average range for this time of year, EIA said in its petroleum report.

Before the report was released on June 18, analysts told WSJ that they expected the EIA would report oil inventories fell by 1.1 million bbl for the week ended June 13.

Separately, the American Petroleum Institute said its own inventory indicated an estimated 5.7-million bbl drop in US crude stocks.

Gasoline, propane supplies

Total motor gasoline inventories increased by 800,000 bbl for the week ended June 13, which EIA described as being in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week.

Distillate fuel inventories increased by 400,000 bbl, and are below the lower limit of the average range for this time of year. Propane-propylene inventories rose 2 million bbl last week and are in the upper half of the average range.

Refinery inputs averaged 15.4 million b/d during the week ended June 13, which was 150,000 b/d lower than the previous week’s average. Refineries operated at 87.1% of capacity for the week ended June 13, EIA said.

Gasoline production increased last week, averaging 9.8 million b/d. Distillate fuel production decreased last week, averaging 4.7 million b/d.

Crude oil imports averaged 7.2 million b/d last week, up by 88,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged 7.3 million b/d, 6.6% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 766,000 b/d. Distillate fuel imports averaged 106,000 b/d last week and remained same as previous week.

Energy prices

The New York Mercantile Exchange July crude oil contract price dropped 54¢ on June 17 to close at $106.36/bbl. The August contract declined by 43¢ to $105.87/bbl.

The natural gas contract for July delivery rose by less than a penny to a rounded $4.71/MMbtu. On the US cash market, gas at Henry Hub, La., was $4.66/MMbtu, down 4¢.

Heating oil for July delivery was up 2¢ to a rounded $3.02/gal. Reformulated gasoline stock for oxygenate blending for July delivery gained a rounded 2¢ to a rounded $3.09/gal.

The August ICE contract for Brent crude delivery rose 51¢, closing at $113.45/bbl. The September contract climbed 57¢ to $112.82/bbl. The ICE gas oil contract for July increased $6.25 to $930.75/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for June 17 was $108.81/bbl, a 28¢ drop from June 16. OPEC’s Secretariat office is scheduled to be closed June 19.

Contact Paula Dittrick at paulad@ogjonline.com.

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