MARKET WATCHEnergy prices rebound; stocks fall

March 22, 2006
Energy futures prices rebounded Mar. 21 as traders' worries about geopolitical threats to supply outweighed their expectations of another weekly build in US crude inventories.

Sam Fletcher
Senior Writer

HOUSTON, Mar. 22 -- Energy futures prices rebounded Mar. 21 as traders' worries about geopolitical threats to supply outweighed their expectations of another weekly build in US crude inventories.

Forecasts called for a large build in crude stocks, offset somewhat by large product withdrawals. Such thinking "is representative of the dichotomy in the current oil market—rising crude inventories vs. refinery maintenance and methyl tertiary butyl ether issues suppressing product supplies," said J. Marshall Adkins at the Houston office of Raymond James & Associates Inc.

Instead, the Energy Information Administration on Mar. 22 reported a 1.3 million bbl drop in commercial US crude inventories to 338.6 million bbl during the week ended Mar. 17. US gasoline stocks fell by 2.3 million bbl to 221.6 million bbl, while distillate fuel declined by 800,000 bbl to 126.7 million bbl during the same period, with slight declines in both heating oil and diesel fuel. "Total commercial petroleum inventories decreased by 5.5 million bbl last week but remain well above the upper end of the average range for this time of year," EIA officials said.

US imports of crude fell by 609,000 b/d to 9.3 million b/d in the week ended Mar. 17. However, analysts generally expect imports to remain at or near 5-year highs in the short term. Crude input into refineries increased by 255,000 b/d to 14.6 million b/d, with refineries operating at 86.7% of capacity. Gasoline production decreased to 8.1 million b/d, while distillate production increased slightly to 3.8 million b/d.

Energy prices
The April contract for benchmark US light, sweet crudes traded at $59.60-61/bbl Mar. 21 before closing at $60.57/bbl, up 15¢ for the day on the New York Mercantile Exchange. Expiration of that contract added to its price volatility, analysts said. The new front-month May contract gained 38¢ to $62.34/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by 15¢ to $60.58/bbl. Heating oil for April delivery increased by 3.05¢ to $1.77/gal on NYMEX. Gasoline for the same month inched up by 0.94¢ to $1.84/gal.

The April natural gas contract increased by 3.3¢ to $6.87/MMbtu on NYMEX, pulled up by the oil market. Demand for natural gas "may rise as industrial users deem it more economical than oil," said Adkins. Meanwhile, weather forecasters are projecting below-average temperatures in the northern US through this week.

"The northeastern coast may be hit by a hurricane this year after escaping a direct hit for the past 20 years, according to a private weather forecaster," reported analysts at Enerfax Daily.

In London, the May IPE contract for North Sea Brent crude gained 79¢ to $62.13/bbl. Gas oil for April continued to fall, however, down by $8 to $547/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dropped $1.18 to $56.14/bbl on Mar. 21.

Contact Sam Fletcher at [email protected].