Sam Fletcher
Senior Writer
HOUSTON, Dec. 15 -- Natural gas futures prices fell in a bout of profit-taking Dec. 14 after hitting record highs in the previous session on the New York market.
Crude prices also declined after the Energy Information Administration reported a surprise increase in US inventories, but a developing storm capable of producing snow, icing, and even severe thunderstorms along the East Coast is expected to keep energy demand high.
EIA said Dec. 14 that commercial US crude inventories rose by 900,000 bbl to 321.2 million bbl during the week ended Dec. 9. Gasoline stocks jumped by 1.8 million bbl to 204.4 million bbl in the same period, but distillate fuel inventories dipped by 100,000 bbl to 130.5 million bbl as a slight decrease in heating oil more than offset a slight rise in diesel fuel.
Imports of crude into the US declined by 150,000 b/d to 10.4 million b/d during the same week. Crude input into US refineries fell by 188,000 b/d to 15.2 million b/d, with refineries operating at 89.6% of their rated capacity. Both gasoline and distillate production decreased to 8.7 million b/d and 3.9 million b/d, respectively.
"The latest reading for implied gasoline demand is 9.268 million b/d, the highest since [Hurricane] Katrina [in late August], the second week in a row above 9.2 million b/d, and the sixth week in a row above 9.1 million b/d," said Paul Horsnell of Barclays Capital Inc., London. "The current indication of the change in gasoline demand from the average for the whole of December 2004 is a rise of 0.6%, which is a strong start when one notes that it is the later weeks of the month that are usually the strongest."
The EIA report "showed strong week-over-week increases in demand across all product groups, reduced production, and mammoth import levels," said analysts at Friedman, Billings, Ramsey & Co. Inc., Arlington, Va. "We expect seasonally greater heating oil demand and lower imports to result in reduced inventories and a strengthening of refining margins over the coming weeks."
Because of hurricane damage this summer, record-high US gasoline prices increased the European-US East Coast gasoline arbitrage spread to more than 40¢/gal [in early September], resulting in a big increase in imports. "Over the past several weeks, US gasoline prices have declined significantly, and the arbitrage spread fell to 21¢/gal earlier this week," Friedman, Billings, Ramsey reported Dec. 14. "Although still high by historical standards, this lower spread should result in reduced import levels over the coming weeks."
Energy prices
The January natural gas contract plummeted by 69.9¢ to close at $14.68/MMbtu Dec. 14 on the New York Mercantile Exchange, after trading at $14.70-15.55/MMbtu during that session.
EIA reported Dec. 15 the withdrawal of 202 bcf of natural gas from US underground storage in the week ended Dec. 9. That exceeded earlier expectations of Wall Street analysts and compared with withdrawals of 59 bcf the previous week and 61 bcf during the same period a year ago. US gas storage now stands at 2.964 tcf, down by 195 bcf from year-ago levels but 107 bcf above the 5-year average.
The January contract for benchmark US sweet, light crudes tumbled by 52¢ to $60.85/bbl, while the February contract fell by 44¢ to $61.87/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., lost 52¢ to $60.86/bbl. Gasoline for January delivery declined by 0.52¢ to $1.64/gal on NYMEX. However, heating oil for the same month gained 0.85¢ to $1.85/gal.
In London, the January contract for North Sea Brent crude increased by 8¢ to $59.60/bbl on the International Petroleum Exchange. Gas oil for January advanced by $3.50 to $542.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 18¢ to $54.62/bbl on Dec. 14.
Contact Sam Fletcher at [email protected].
