Sam Fletcher
Senior Writer
HOUSTON, Mar. 8 -- The near-month crude futures price bounced back above $62/bbl in intraday trading Mar. 7 in the New York market, following reports of unexpected large drops in US crude and gasoline inventories.
Gasoline inventories fell by 3.75 million bbl to 216.4 million bbl in the week ended Mar. 2, vs. industry expectations of a 1.5 million bbl draw. Crude stocks dropped 4.85 million bbl to 324.2 million bbl vs. an anticipated build of 1.8 million bbl. The Energy Information Administration said commercial US distillate fuel inventories declined by 1.3 million bbl to 123.2 million bbl, with a drop in heating oil more than compensating an increase in diesel. Propane and propylene inventories dropped by 3.2 million bbl to 28.7 million bbl (OGJ Online, Mar. 7, 2007).
"Total inventories, adjusted for demand, are below the 3-year average. In total, refined product inventories declined by 5.4 million bbl last week and are now at 25.2 days of forward demand cover, below the 3-year average of 25.9 days," said Jacques Rousseau, senior energy analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va.
The fall of crude inventories was counterseasonal and primarily the result of a 540,000 b/d decline in imports along the Gulf Coast, due to weather-related delays in lightering operations in the Houston Ship Channel. "But there is also a genuine compression of imports in progress. On a 4-week average, US crude oil imports are now down to what is a 2-year low outside of hurricane–affected weeks [in 2005]," said Paul Horsnell at Barclays Capital Inc., London. "Much of the latest draw in crude might work its way back into the data, [although] inventories have never recovered even close to their levels before the Houston Ship Channel delays of December," he said.
"The larger-than-expected draw in gasoline inventories, with motor gasoline demand above 5-year highs, stoked investor concerns surrounding supplies as we approach the summer driving season," said analysts in the Houston office of Raymond James & Associates Inc.
"The latest US weekly data have now shown product inventories falling by 5 million bbl or more relative to their 5-year average for 3 straight weeks. Initial figures for the whole of February show demand growing at the fastest rate for more than 10 years," Horsnell said. "The overall level of inventories has over the past 4 weeks now drawn by 28.2 million bbl faster than the normal seasonal pattern, (i.e., at a rate of 1 million b/d). This has taken the total of US commercial inventories down to its lowest level since May 2005."
Energy prices
The April contact for benchmark US sweet, light crudes closed at $61.82/bbl, up by $1.13 for the day, after peaking at $62.10/bbl in intraday trading Mar. 7 on the New York Mercantile Exchange. The May contract escalated by $1.22 to $63.28/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.13 to $61.83/bbl. The April contract for reformulated blend stock for oxygenate blending (RBOB) jumped by 4.22¢ to $1.90/gal on NYMEX. Heating oil for the same month climbed by 2.01¢ to $1.77/gal.
The April natural gas contract lost 10.6¢ to $7.37/MMbtu on forecasts for warmer weather in the near term. On the US spot market, natural gas at Henry Hub, La., slipped by 1.5¢ to $7.50/MMbtu. EIA reported Mar. 8 the withdrawal of 102 bcf of natural gas from US underground storage during the week ended Mar. 2. That was within the consensus of Wall Street analysts and compared with withdrawals of 132 bcf the previous week and 85 bcf during the same period a year ago. That reduced US gas storage to 1.6 tcf, down by 268 bcf from year-ago levels but 194 bcf above the 5-year average.
In London, the April IPE contract for North Sea Brent crude gained $1.11 to $62.50/bbl. Gas oil for March increased by $10.50 to $543.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes climbed by 96¢ to $58.08/bbl on Mar. 7.
Contact Sam Fletcher at [email protected].
