MARKET WATCHEnergy prices decline in expectation of distillate build

Nov. 23, 2004
Energy futures prices generally declined Monday amid widespread market expectations that the Energy Information Administration finally will report Wednesday a increase in US heating oil stocks during the week ended Nov. 19, after 9 previous weeks of consecutive declines.

Sam Fletcher
Senior Writer

HOUSTON, Nov. 23 -- Energy futures prices generally declined Monday amid widespread market expectations that the Energy Information Administration finally will report Wednesday a increase in US heating oil stocks during the week ended Nov. 19, after 9 previous weeks of consecutive declines.

To some observers, it's a familiar pattern somewhat akin to whistling past a graveyard. In recent weeks, prices usually have fallen in anticipation of a build in US inventories of crude and petroleum products, then rebounded as distillates, including heating oil, continued to decline. At this point, heating oil stocks are nearly 14% lower than last year in the US, which is the world's largest market. Demand for heating oil is already up by nearly 16% this year, with the start of the peak demand season this month, and this winter generally is expected to be colder than the last (OGJ Online, Nov. 18, 2004).

However, weather forecasters have been predicting a wave of cold weather "for a couple of weeks, and except for a day or 2, it hasn't materialized," said analysts Tuesday at Enerfax Daily.

Meanwhile, the American Petroleum Institute reported US imports of crude and petroleum products hit a new high of nearly 13.6 million b/d in October, amounting to two-thirds of total US demand for that month. Crude imports increased by 4.5% from a year ago to more than 10.5 million b/d in October. Imports of petroleum products were up by a third to nearly 3.1 million b/d, a record high for that month, said API officials.

API reported strong increases for all major products last month, except for distillate fuel, which includes heating oil and diesel fuel.

Energy prices
The new front-month January contract for benchmark US sweet, light crudes lost 25¢ to $48.64/bbl Monday on the New York Mercantile Exchange, while the February position dipped by 4¢ to $48.81/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 5¢ to $48.50/bbl Monday.

Heating oil for December delivery dropped 3.77¢ to $1.44/gal Monday on NYMEX. Gasoline for the same month lost 2.15¢ to $1.29/gal. The December natural gas contract plummeted by 35.3¢ to $6.76/Mcf Monday, wiping out the previous session's gain of 24.2¢/Mcf;

In London, the January contract for North Sea Brent crude was down by 51¢ to $44.38/bbl on the International Petroleum Exchange.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained $1.11 to $38.62/bbl Monday.

Contact Sam Fletcher at [email protected]