Sam Fletcher
OGJ Senior Writer
HOUSTON, Dec. 18 -- Energy futures prices retreated Tuesday on technical factors, with some New York traders claiming that market was overbought because Venezuela's general strike has slashed oil production and exports from that country.
However, analysts at Deutsche Bank AG said Tuesday, "Venezuela's strikes, Japan's nuclear outages, and an early bout of cold weather in the US and Japan have created a perfect storm of high oil, natural gas, and refining margins harking back to 2000-2001."
The virtual shutdown of exports of oil and petroleum products from Venezuela into primarily US markets has pumped up US refining margins more than $2 to $6.50/bbl in the past week. As of Wednesday, the strike had lasted 17 days.
"And the effects are knocking right through the barrel," said Deutsche Bank analysts.
"Loss of gasoline imports has widened the gasoline premium to crude by almost $3 to $6.80/bbl, the highest level since July, and similar support seems to be coming from heating oil," they said. "The distillate premium to crude—a crack that generally trends lower than that for gasoline—rose by $2 to $6/bbl, the highest level since September 2001."
Paul Horsnell, JP Morgan Chase & Co., London, earlier reported, "The main importance of Venezuela in the oil market is that it is one of the two dominant suppliers of the imported heavy crude oil used in US Gulf refineries. . . that market is effectively a Mexican-Venezuelan duopoly."
The two countries supplied 89.6% of the oil to that US refining sub market during the first 10 months of this year, jumping to 93% in October. As a result, said Deutsche Bank officials, "Refiners configured to run Venezuelan grades have had to reduce runs in the absence of look-alike grades to make the economics work."
The January contract for benchmark US sweet, light crudes was unchanged Tuesday at $30.10/bbl on the New York Mercantile Exchange, but the February position retreated by 10¢ to $29.94/bbl. Traders said the market evidenced significant resistance in that session against a price increase above $30.10/bbl.
Unleaded gasoline for January delivery fell 2.46¢ to 85.39¢ /gal. Heating oil for the same month was down 1.69¢ to 83.95¢ /gal.
The January natural gas contract dropped 10.1¢ to $5.24/Mcf on NYMEX. "The market finally began consolidation from the recent highs, trading range-bound between $5.20 and $5.30 for most of (Tuesday's) session. The direction of the market is likely to be dictated by new weather forecasts coming out today," said analysts Wednesday at Enerfax Daily.
After NYMEX closed, the American Petroleum Institute reported Tuesday that US oil inventories fell by 3.2 million bbl last week to 283.9 million bbl during the week ended Dec. 6. US distillate stocks were down 462,000 bbl to 124.1 million bbl, but US gasoline inventories increased by 119,000 bbl to 205.5 million bbl, officials said. US oil imports declined by 272,000 b/d to 9.4 million b/d last week. However, imports of petroleum products increased by 188,000 b/d to 2.3 million b/d.
In London, the February contract for North Sea Brent oil lost 14¢ to $27.92/bbl on the International Petroleum Exchange. The January contract dipped 3.9¢ to the equivalent of $3.96/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 15¢ to $28.76/bbl Tuesday.
Contact Sam Fletcher at [email protected]
