MARKET WATCHCrude futures price drops below $74/bbl

July 19, 2006
Crude futures prices continued to fall July 18, eliminating in two consecutive trading sessions all of last week's run-up to record high levels for the front-month contract.

Sam Fletcher
Senior Writer

HOUSTON, July 19 -- Crude futures prices continued to fall July 18, eliminating in two consecutive trading sessions all of last week's run-up to record high levels for the front-month contract.

Crude for August delivery dropped below $74/bbl shortly after US Sec. of State Condoleezza Rice said a ceasefire between Israel and the Hezbollah guerillas in Lebanon should come as soon as conditions permit.

"There are persisting concerns over the tensions in the Middle East as Israel continues a week-long offensive against Lebanon," said analysts in the Houston office of Raymond James & Associates Inc. "However, investors seem at ease that the fighting will not spread to neighboring countries, including the oil-rich Iran."

US inventories
The US Energy Information Administration said July 19 that commercial US crude inventories inched up by 200,000 bbl to 335.5 million bbl during the week ended July 14. Gasoline stocks increased by 1.5 million bbl to 214.2 million bbl in the same period. Distillate fuel inventories rose by 1.2 million bbl to 131.1 million bbl, with increases in heating oil more than compensating for decreases in ultralow-sulfur diesel.

Imports of crude into the US jumped by 1.1 million b/d to 10.7 million b/d during that week. Input into US refineries was up by 410,000 b/d to 15.9 million b/d, with units operating at 92.9% of capacity. Gasoline production increased slightly to 9.2 million b/d while distillate fuel production declined to 4.2 million b/d.

Energy prices
The August contract for benchmark US light, sweet crudes fell by $1.76 to $73.54/bbl July 18 on the New York Mercantile Exchange. That was on top of a loss of $1.73/bbl on July 17, wiping out total gains of $3.42 over four earlier NYMEX sessions to a record $77.03/bbl finish on July 14. The September contract lost $1.65 to $75.26/bbl on July 18.

On the US spot market, West Texas Intermediate at Cushing, Okla., was down by $1.76 to $73.55/bbl. Heating oil for August delivery lost 3.6¢ to $1.98/gal on NYMEX. Regular gasoline for the same month declined by 1.83¢ to $2.27/gal. The August natural gas contract fell by 22.8¢ to $5.56/MMbtu following the retreat in crude prices and predictions of a break in the heat wave that has recently baked much of the US.

In London, the September IPE contract for North Sea Brent crude lost $1.56 to $74.36/bbl. Gas oil for August inched up by $1.75 to $655.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dropped $1.14 to $70.29/bbl on July 18

Contact Sam Fletcher at [email protected].