Sam Fletcher
Senior Writer
HOUSTON, Mar. 31 -- Crude futures prices for May plunged as low as $52.50/bbl in intraday trading Mar. 30 in New York before buyers reentered the market late in the session to bid prices back up.
Meanwhile, the Energy Information Administration reported commercial US crude inventories escalated by 5.4 million bbl to 314.7 million bbl during the week ended Mar. 25. However, gasoline stocks dropped by 2.9 million bbl to 214.4 million bbl in the same period. Distillate fuel fell by 1.1 million barrels to 103.4 million bbl. While most of the distillate decline was in diesel fuel, heating oil also diminished.
US imports of crude increased by 298,000 b/d to nearly 10.6 million b/d in that period. Input into US refineries was up by 222,000 b/d to nearly 15.2 million b/d, with units operating at 91.1% of capacity.
"Higher prices are being driven as much by supply-side weakness as by demand strength. Non-OPEC supply growth in [the first quarter was] running at just 20% of the level forecast by the International Energy Agency just 6 months ago," said Paul Horsnell, Barclays Capital Inc., London.
"The short-term tone remains bearish, with the large contango in crude prices aiding a rapid stock build. In the key area of the US oil market, crude inventories have risen by a further 6.5 million bbl and are now at their highest since June 2002," he said.
"Our view is that non-OPEC supply growth is going to continue to under perform in coming years for three main reasons—the pipeline of projects coming on in the next few years is too narrow, the international oil companies face a skills shortage, and the decline rates from mature production continue to surprise on the upside," said Horsnell. "In total, there is much more at work in the market than a temporary demand shock. The picture is worse, in our opinion, for the downstream, where there is little likely to come promptly on stream in terms of capacity expansion, and where even sluggish demand growth would stretch the system."
Energy prices
The May contract for benchmark US sweet, light crudest closed at $53.99/bbl, down 24¢ for the day on the New York Mercantile Exchange, while the June contract lost 16¢ to $54.79/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by 24¢ to $54/bbl.
However, heating oil for April delivery shot up by 5.03¢ to $1.61/gal Mar. 30 on NYMEX. Gasoline for the same month increased by 2.31¢ to $1.60/gal. The May natural gas contract gained 5.8¢ to $7.46/MMbtu, "propped by steady technical and [investment] fund buying after a 5% spike [Mar. 22] despite weaker crude oil prices and milder Northeast and Midwest weather this week," said analysts at Enerfax Daily.
In London, the May contract for North Sea Brent crude fell by 94¢ to $52.09/bbl on the International Petroleum Exchange.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 24¢ to $48.80/bbl on Mar. 30.
Contact Sam Fletcher at [email protected]
