MARKET WATCH: US light, sweet crude narrows price gap with Brent

Crude oil prices on the New York market briefly declined in trading June 25 after a weekly government report showed an unexpected gain in US crude oil inventories, but oil prices rebounded before the closing, which analysts attributed in part to refineries running at higher capacity than anticipated.

“Historically, this is the time of year that refiners really crank out in preparation to supply for the summer driving season,” Kyle Cooper, a managing partner at IAF Advisors in Houston, told the Wall Street Journal.

US refineries ran at 88.5% of capacity for the week ended June 20, the Energy Information Administration said in its weekly petroleum report. Analysts surveyed by the WSJ before the report was released had forecast a refining capacity of 87.9%.

The gap between settlement prices for the historically higher-priced Brent and US light, sweet crude narrowed June 25 to $7.50/bbl, its narrowest front-month difference since June 16. The narrowing came upon news the US Department of Commerce authorized two companies to export condensate (OGJ Online, June 25, 2014).

The American Fuel & Petrochemical Manufacturers maintained the authorization, made in a private ruling, did not signal a significant policy change, and that the market overreacted to the news.

Analysts said the private ruling provided more clarity as some lawmakers call for a lifting of the decades-old ban on US crude oil exports.

“We view the expanding definition of refined products as a positive, and a step closer to greater export opportunities,” Morgan Stanley analysts said in a June 25 research note.

Meanwhile, natural gas storage levels also built last week.

Working gas in underground storage in the Lower 48 was estimated at 1.8 tcf as of June 20, EIA said in its weekly gas storage report, which marked a net increase of 110 bcf from the previous week. Stocks were 690 bcf less than last year at this time and 822 bcf below the 5-year average of 2.6 tcf.

Energy prices

The New York Mercantile Exchange August crude oil contract price gained 47¢ on June 25 to close at $106.50/bbl. The September contract climbed 40¢ to $105.72/bbl.

The natural gas contract for July rose 1.8¢ to a rounded $4.55/MMbtu. On the US cash market, gas at Henry Hub, La., was $4.57/MMbtu, up 8¢.

Heating oil for July delivery fell a rounded 1.2¢ to a rounded $3.03/gal. Reformulated gasoline stock for oxygenate blending for July delivery dropped 3.3¢ to settle at a rounded $3.09/gal.

The August ICE contract for Brent crude delivery declined 46¢, closing at $114/bbl. The September contract fell 52¢ to $113.51/bbl. The ICE gas oil contract for July decreased $7.25 to $928.75/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for June 25 was $109.63/bbl, up a penny.

Contact Paula Dittrick at paulad@ogjonline.com.

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