Sam Fletcher
Senior Writer
HOUSTON, Jan. 29 -- Despite a severe winter storm that dumped as much as 14 inches of snow in the Northeast, energy futures prices continued to fall Wednesday because of conflicting government and industry reports on US inventories of crude and petroleum products.
The American Petroleum Institute reported Wednesday a jump of 3.6 million bbl to 268.2 million bbl of US oil stocks during the week ended Jan. 23. Distillates fell by 2.6 million bbl to 133.6 million bbl during the same period, and gasoline stocks lost 7.2 million bbl to 201.6 million bbl, API said.
Earlier, the US Energy Information Administration said commercial US oil inventories fell by 1.5 million bbl to a 28-year low of 263.7 million bbl during the week ended Jan. 23 (OGJ Online, Jan. 28, 2004). US distillate fuel stocks plunged by 4.5 million bbl, with decreases in both diesel fuel and heating oil, said EIA officials. Gasoline stocks fell by 3.5 million bbl to 206 million bbl during the same period.
Traders were expecting a build of 1-2 million bbl in US crude stocks, along with an increase in distillate inventories.
Energy prices
With conflicting reports on oil inventories, the March contract for benchmark US sweet, light crudes, fell by 50¢ to $33.62/bbl Wednesday on the New York Mercantile Exchange. The April contract lost 45¢ to $32.81/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., plunged by 68¢ to $33.75 bbl.
Heating oil for February delivery was down by 2¢ to 97.24¢/gal Wednesday on NYMEX. Gasoline for the same month dipped by 0.16¢ to 98.68¢/gal.
However, the expiring February natural gas contract bumped up by 5.9¢ to $5.78/Mcf, "lifted by a firmer physical [spot] market and supportive weather forecast for the Northeast and Midwest," said analysts Thursday at Enerfax Daily. The new near-month March natural gas contract gained 8.4¢ to $5.74/Mcf.
"The market opened up and hit the [day's] high of $5.95[/Mcf] early before dipping back," analysts said. "The forecasts look very cold, and [the spot gas market] has been very strong, trading above futures this week for the first time in a long time, helping to underpin the February expiration."
EIA reported Thursday the withdrawal of 195 bcf of natural gas from US underground storage in the week ended Jan. 23. That compares with draws of 156 bcf the previous week and 247 bcf during the same period last year.
Short term trading
"Over the past week, trading appears to have concentrated even more than usual on the very short term," noted Paul Horsnell, head of energy research, Barclays Capital Inc., London, in a report Wednesday.
The latest EIA data are "screamingly bullish," he said. For those "looking to get into the downturn in prices early, the appearance of these numbers may not subtract from the bearish eagerness to get the timing of the turn right, but it does remove any fundamental basis for the turn to happen now," said Horsnell.
Moreover, he said, "The [latest] draw in heating oil inventories confirms the start of a period of significant draws. The path of inventories has been shifted below the 5-year average again and has moved closer to last year's extremely bullish trajectory. The implied distillate demand figures have also started to make more sense. . .in sharp contrast to those suspiciously low readings earlier in the month."
Horsnell said, "The most surprising numbers are those for gasoline. For nearly 3 months, gasoline inventories have been tracking the usual sharp seasonal rise almost perfectly." In the latest weekly data, however, he said, "The pattern has departed from the script fairly dramatically. The period left for building gasoline inventories is running out, and they should not be drawing at this point. Some sharp builds are required over the next month, or there will be a strong prospect of yet another gasoline season showing strong price dislocations."
Other prices
In London, the March contract for North Sea Brent oil fell by 46¢ to $29.77/bbl Wednesday on the International Petroleum Exchange. Gas oil for February delivery lost $10.50 to $262.50/tonne. The February natural gas contract continued to plummet Wednesday, down by $13.9¢ to $4.41/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries lost 50¢ to $29.49/bbl Wednesday.
Contact Sam Fletcher at [email protected]
