Sam Fletcher
Senior Writer
HOUSTON, May 25 -- Crude and gasoline prices fell May 24 as reports of a build in US gasoline inventories triggered a sell-off by speculators in the New York and London futures markets.
Natural gas prices dropped below $6/MMbtu on the New York Mercantile Exchange in anticipation of a government report of another large build in US gas storage. The Energy Information Administration reported May 25 the injection of 83 bcf of gas into US underground storage during the week ended May 19. That injection was below the consensus of Wall Street analysts and down from injections of 91 bcf the previous week and 93 bcf during the same period last year. US gas storage is now at 2.2 tcf, up by 484 bcf from a year ago and 716 bcf above the 5-year average.
The June natural gas contract dropped 29.4¢ to $5.96/MMbtu May 24 on NYMEX. "Just when it looked like the market had carved out a seasonal bottom and set its sights on higher prices, the June contract, 2 days short of expiration, broke back below $6 in a convincing fashion," said analysts at Enerfax Daily.
"Forget $70/bbl oil prices; natural gas concerns continue to drive the market (which may be the case throughout the summer)," said J. Marshall Adkins in the Houston office of Raymond James & Associates Inc. "The question of the day (and probably the next several months) is where will gas bottom out? Our answer: when demand finally responds. We're going to need strong year-over-year demand growth to signal to the market that record high storage will not kill gas prices. Look for more volatility with each new data point."
EIA earlier reported US gasoline inventories jumped by 2.1 million bbl to 208.5 million bbl in the week ended May 19 (OGJ Online, May 24, 2006). US crude stocks dropped 3 million bbl to 343.9 million bbl during the same week. Distillate fuel stocks increased by 2.5 million bbl to 117.1 million bbl, with increases in both diesel fuel and heating oil.
Imports of crude into the US fell by 826,000 b/d to 9.6 million b/d in the latest period. Total gasoline imports averaged more than 1.6 million b/d, the second highest weekly average ever, said EIA officials. Input of crude into US refineries dipped by 3,000 b/d to 15.3 million b/d, with refineries operating at 89.7% of capacity.
"US weekly oil data show a continuation of fairly robust demand, with gasoline inventories following seasonal patterns despite high imports, and with crude oil inventories falling in the face of low imports," said Paul Horsnell, Barclays Capital Inc., London.
Energy prices
The July contract for benchmark US sweet, light crudes fell by $1.90 to $69.68/bbl while the August contract dropped $1.88 to $70.61/bbl, wiping out gains by both in the previous NYMEX session. On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.80 to $69.71/bbl. Gasoline for June delivery fell 8.9¢ to $2.02/gal on NYMEX, eliminating gains from the previous session. Heating oil for the same month dropped 5.87¢ to $1.94/gal.
In London, the July IPE contract for North Sea Brent crude retreated by $1.78 to $69.22/bbl. The June contract for gas oil lost $9 to $622/tonne.
The Vienna headquarters of the Organization of Petroleum Exporting Countries was closed for a holiday on May 25.
Contact Sam Fletcher at [email protected].
