MARKET WATCHEnergy futures prices decline ahead of inventory report

March 17, 2004
Energy futures prices generally slipped slightly amid some profit taking Tuesday as traders awaited the next reports on US crude inventories, which they expected to follow the bearish trend of recent weeks.

Sam Fletcher
Senior Writer

HOUSTON, Mar. 17 -- Energy futures prices generally slipped slightly amid some profit taking Tuesday as traders awaited the next reports on US crude inventories, which they expected to follow the bearish trend of recent weeks.

Sure enough, the US Energy Information Administration reported early Wednesday that commercial US inventories of crude increased by 1.6 million bbl to 281.1 million bbl during the week ended Mar. 12. That exceeded a consensus among Wall Street analysts of a 750,000 bbl build. However, US crude stocks are 23.4 million bbl below the 5-year average for this time of year, officials said.

US gasoline stocks fell by 800,000 bbl to 199.6 million bbl during the same period, marking the first time since Nov. 28, 2003, that gasoline has dropped below 200 million bbl. Gasoline is 9.8 million bbl below the 5-year average at this point, said EIA officials.

Distillate fuel inventories also fell by 900,000 bbl to 11.8 million bbl, with declines in both diesel fuel and heating oil. Those stocks are 3.1 million bbl below the 5-year average, EIA reported.

US oil imports were down by 290,000 b/d to 9.5 million b/d last week, with large decreases on the Gulf and East Coasts. Crude imports from Saudi Arabia apparently were "relatively low again last week," said EIA.

Crude input into US refineries decreased by 269,000 b/d to average nearly 14.5 million b/d, with the largest declines seen in the Midwest and on the West Coast. Nevertheless, EIA reported, "Finished gasoline production averaged nearly 8.6 million b/d, the largest amount since the week [ended] Dec. 26, 2003."

Energy prices
The April contract for benchmark US light, sweet crudes inched up by 4¢ to $37.48/bbl Tuesday on the New York Mercantile Exchange, while the May position dipped by 2¢ to $36.68/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., climbed by 55¢ to $37.48/bbl.

Gasoline for April delivery lost 0.55¢ to $1.1264/gal, despite market concerns over possible gasoline shortages this summer and expectations that EIA would report a continued decline in gasoline stocks. Heating oil for the same month slipped by 0.21¢ to 91.48¢/gal on NYMEX.

The April natural gas contract declined by 3¢ to $5.69/Mcf Tuesday, "but slightly firmer crude oil [prices], uncertainty about next week's weather forecasts, and a stable cash [spot] market helped limit the loss," said analysts Wednesday at Enerfax Daily.

"Uncertainty over next week's weather helped keep sellers cautious," they said. "The government forecasters are calling for a mild week for most of the nation next week, while some private meteorologists expect another shot of cold air to hit the Great Lakes and the Northeast."

In London, the April contract for North Sea crude fell by 35¢ to $33.45/bbl Tuesday on the International Petroleum Exchange. Gas oil for April delivery lost $2 to $279.75/tonne. The April natural gas contract dipped by 0.55¢ to the equivalent of $3.67/Mcf.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 29¢ to $32.59/bbl Tuesday.

Sheikh Ahmad Fahd al-Sabah, Kuwait's energy minister, said Tuesday that his country would consider delaying OPEC's production cut of 1 million b/d that is scheduled for Apr. 1, provided there is a supply shortage and prices remain high.

"The delay is possible if we find that the surplus is less than 3.5 million bbl and prices are high because of demand," he told reporters. "We must know the size of the surplus in the market and we should know the cause of the soaring price."

However, a new report this week by the Emirates Industrial Bank in Abu Dhabi said that market trends point toward increased oil supplies and downward pressure on prices. "The short-term expectation for 2004 is mostly downwards, as increasing supply in the market will put downward pressure on prices," said the report. "Most western institutions expect average oil prices in 2004 to be less than $25[/bbl]."

Contact Sam Fletcher at [email protected]