Sam Fletcher
Senior Writer
HOUSTON, Dec. 11 -- Energy futures prices rebounded slightly Wednesday from profit taking in the previous session as traders reacted to industry and government reports of larger-than-expected declines in US oil inventories.
The American Petroleum Institute reported late Wednesday that US crude stocks dropped by 8.9 million bbl to 274 million bbl during the week ended Dec. 5. API said US gasoline inventories jumped by 5.1 million bbl to 203.4 million bbl during that period, with distillate stocks increasing by 2.7 million bbl to 134.5 million bbl.
The US Energy Information Administration earlier reported US oil stocks plunged by 6.4 million bbl to 277.9 million bbl in the week ended Dec. 5. EIA said US inventories of distillate fuel increased by 1 million bbl to 132.1 million bbl, with diesel fuel accounting for most of that gain. It said US gasoline stocks also increased for the second consecutive week, up by 3.4 million bbl to 200.5 million bbl (OGJ Online, Dec. 10, 2003).
Bull, bear data
Data from either group are "overwhelmingly bullish for crude oil, while bearish for oil products," said Paul Horsnell, head of energy research at Barclays Capital Inc., London. For the past 3 weeks, US oil inventories "have been falling relative to the normal pattern at a rate of 650,000 b/d, and oil product inventories have been rising relative to normal at a rate of 270,000 b/d," he said.
Last week's large draw on US oil inventories represents "a continuation of the recent pattern of relatively low imports and rising refinery runs. With the end of the year looming, and the incentive being to minimize inventories at that point for tax purposes, we do not expect the tightness in crude oil to abate significantly this month," Horsnell said.
The recent increase in US gasoline stocks fits the "usual pattern" for this time of year. "With perhaps 2 weeks of seasonal build left, we remain gasoline bulls," said Horsnell. However, he said, "Heating oil figures are bearish, in that for a second week the path of inventories has diverged from last year, and for the second week the implied demand figure is disappointing. The data should still improve as recent colder weather will, after a lag, result in the transmission of a drawdown of tertiary (i.e. final consumer) inventories to a drawdown in primary inventories."
Crude inputs into US refineries increased by 213,000 b/d to an average 15.7 million b/d during the week ended Dec. 5. US Oil imports increased by 403,000 b/d to an average 9.5 million b/d during the same period. "It appears that crude oil imports from Saudi Arabia and Nigeria were relatively high," EIA said.
Meanwhile, two unions representing Nigerian oil workers are threatening to resume a suspended September strike if the Nigerian government fails to repair the country's four refineries and make them functional before the end of this year.
The workers suspended their strike after the government promised to roll back domestic gasoline. However, the government initiated deregulation of the downstream sector of the Nigerian oil industry on Oct. 1, allowing marketing companies to set gasoline prices.
Energy prices
Traders reacted Wednesday primarily to the drop in US oil inventories. The January contract for benchmark US sweet, light crudes gained 12¢ to $31.88/bbl Wednesday on the New York Mercantile Exchange, while the February contract advanced by 16¢ to $31.76/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., increased by 10¢ to $31.88/bbl.
Unleaded gasoline for January delivery was up by 0.27¢ to 86.73¢/gal Wednesday on NYMEX. Heating oil for the same month increased by 0.18¢ to 88.84¢/gal. However, the January natural gas contract dipped by 1.1¢ to $6.71/Mcf on NYMEX, "as initial buying on cold forecasts was countered by profit taking after the early spike," said analysts Thursday at Enerfax Daily.
New high for gas
"The market opened much higher and rocketed early [Wednesday] by more than 80¢, or 12%, to $7.60[/Mcf], a new contract high and the highest level for a front-month contract since early March," said Enerfax analysts. "Then it quickly tumbled [by] almost $1 before noon to a [day's] low of $6.65[/Mcf] before recovering somewhat in highly volatile afternoon trading." Forecasts of more cold weather "had some traders panicking," said analysts.
Early Thursday, EIA the US Energy Information Administration reported 111 bcf of natural gas withdrawn from US underground storage during the week ended Dec. 5. That exceeded expectations of Wall Street analysts and is expected to help buoy natural gas prices through the rest of this week. US gas storage now exceeds 2.98 tcf and is above year-ago levels by 190 bcf and above the 5-year average by 79 bcf.
In London, the January contract for North Sea Brent oil inched up by 3¢ to $29.66/bbl on the International Petroleum Exchange. Gas oil for December delivery lost $1.25 to $263.75/tonne, while the January natural gas contract gained 3.4¢ to the equivalent of $5.82/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 9¢ to $29.64/bbl Wednesday.
Contact Sam Fletcher at [email protected]
