Benchmark crude oil prices continued modest declines on the New York and London markets Apr. 18 as concerns persisted about oversupply from the US. The losses continued into early Apr. 19 after weekly inventory data released by the US Energy Information Administration failed to change market sentiment.
EIA’s Petroleum Status Report indicated US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, fell for a second consecutive week for the first time this year. During the week ended Apr. 14, crude stockpiles shed 1 million bbl compared with the previous week’s total, but total motor gasoline inventories increased 1.5 million bbl.
Those figures confirmed a trend seen in separate data from the American Petroleum Institute released Apr. 18 that showed an 840,000-bbl decline in US crude inventories and a 1.4 million-bbl build in gasoline stockpiles during the week ended Apr. 14.
Ole Hansen, head of commodity strategy at Saxo Bank, noted in a tradingfloor.com newsletter that US gasoline stocks had been falling in line with seasonal expectations for the past 7 weeks, but “confirmation of the API rise is likely to attract some negative price attention.” Matt Smith, ClipperData director of commodity research, said a gasoline gain “is tilted a little bearish, although a build of 2.5 million bbl on the Gulf Coast was in response to higher refining activity.”
Traders and market observers fear increasing oil production from areas such as the Permian basin of West Texas and southeastern New Mexico and the Gulf of Mexico will offset the oil market impact of the agreement among members of the Organization of Petroleum Exporting Countries and several non-OPEC producers to collectively curb output by 1.8 million b/d during the year’s first half (OGJ Online, Apr. 18, 2017).
EIA last week revised upward its overall US crude production forecast to 9.2 million b/d in 2017 and 9.9 million b/d in 2018.
“US producers’ ability to restart and increase production has been a major source of surprise during the past 6 months,” Hansen said. “The continued rise since last October currently provides the biggest obstacle to the OPEC-NOPEC’s rebalancing effort.” OPEC will evaluate whether or not to continue the agreement into the second half during a May 25 meeting in Vienna.
“From a technical perspective, we are looking for a technical reaction back [down] to $51.20/bbl on [West Texas Intermediate] and $54/bbl on Brent crude,” Hansen said. “Failure to reach these targets—WTI is so far finding support already at $52.17/bbl—would signal a strong market where short positions are looking to take cover into any signs of weakness.”
Energy prices
The May crude oil contract on the New York Mercantile Exchange lost 24¢ on Apr. 18 to close at $52.41/bbl. The June contract decreased 26¢ to $52.85/bbl.
The natural gas price for May declined 1.8¢ to a rounded $3.15/MMbtu. The Henry Hub cash gas price was unchanged at $3.06/MMbtu.
Heating oil for May fell 1.1¢ to a rounded $1.62/gal. Reformulated gasoline stock for oxygenate blending for May dropped by less than a penny to a rounded $1.71/gal.
The Brent crude contract for June on London’s ICE fell 47¢ to settle at $54.89/bbl. The July contract was down 44¢ to $55.44/bbl. The May gas oil contract declined $6.50 to $491.25/tonne.
The average price for OPEC’s basket of benchmark crudes on Apr. 18 was $52.60/bbl, dropping 34¢.
Contact Matt Zborowski at [email protected].
