Sam Fletcher
Senior Writer
HOUSTON, Mar. 15 -- After falling for four consecutive sessions on the New York market, the front-month crude contract rebounded above $58/bbl Mar. 14 partly on expectations the Organization of Petroleum Exporting Countries would take no action during its Mar. 15 meeting in Vienna.
In a statement issued at the end of the brief meeting, OPEC ministers said, "Although all indicators clearly show that the market remains well-supplied with crude oil and that the Organization for Economic Cooperation and Development [countries'] commercial oil stocks are healthy, overall oil market volatility is likely to continue." Meanwhile, they said the world economic performance in 2007 is expected to remain relatively firm, albeit slightly lower than in 2006, reflecting higher interest rates. As a result, they voted simply to continue monitoring market developments.
OPEC also issued its Monthly Oil Market Report for March in which it said a combination of moderating demand growth and increasing distillate and conversion capacity should lead to an increase in spare refinery capacity this year.
With the end of winter and fewer concerns about the summer driving season, market attention is expected to shift to crude oil market developments in the coming months, the report said. "As a result, aside from potential downside risks to the world economic outlook, other factors such as non-OPEC supply, the pace of incremental demand, and non-fundamental factors including geopolitics warrant close monitoring as they are expected to be the main drivers behind crude oil price movements in the coming months," the report said.
"Overall, refiners are sitting on comfortable stock levels across the world, and with the completion of US refinery maintenance schedule, gasoline stocks in the US could rebound from the recent draw ahead of the driving season," OPEC said.
The report increased its estimate of world oil demand growth for 2007 by 100,000 b/d to 1.3 million b/d, or 1.5%, primarily because of increased North American demand this winter. Non-OPEC output is expected to average 50.6 million b/d in 2007, an increase of 1.2 million b/d over the previous year and a downward revision of 46,000 b/d from the last assessment. Preliminary data for February puts non-OPEC supply at 50.5 million b/d. In February, OPEC crude oil production averaged 29.96 million b/d, broadly unchanged from the previous month. For 2007, demand for OPEC crude is expected to average 30.4 million b/d, broadly unchanged from the previous year.
An unexpected drop in US distillate inventories also helped strengthen energy futures prices Mar. 14. The Energy Information Administration said distillate fuel declined by 2.8 million bbl to 120.4 million bbl, with losses primarily in heating oil but also diesel (OGJ Online, Mar. 14, 2007). US crude stocks increased by 1.1 million bbl to 325.3 million bbl during the week ended Mar. 9. Gasoline inventories dropped 2.5 million bbl to 213.9 million bbl during the same week.
"Positive fundamentals continued as total refined product inventories declined week over week, with demand continuing to outpace production and imports," said Jacques Rousseau, senior energy analyst at Friedman, Billings, Ramsey Group Inc., Arlington, Va. "The refinery utilization rate dropped slightly week over week, and refining margins climbed higher, especially on the West Coast and in the Midwest. We expect this trend of declining inventories to continue at least through the end of March, putting upward pressure on refining margins and refiner stock prices," he said.
Energy prices
The April contract for benchmark US sweet, light crudes gained 23¢ to $58.16/bbl Mar. 14 on the New York Mercantile Exchange. The May contract increased 31¢ to $60.47/bbl. On the US spot market, West Texas Intermediate was up 23¢ to $58.17/bbl. Heating oil for April delivery gained 1.88¢ to $1.71/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB) slipped by 0.35¢ but was virtually unchanged at $1.93/gal.
The April natural gas contract jumped by 19.1¢ to $7.08/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., gained 6.5¢ to $6.85/MMbtu. EIA reported the withdrawal of 115 bcf of natural gas from US underground storage during the week ended Mar. 9. That was in the consensus range for Wall Street analysts but up from 102 bcf the prior week and 55 bcf during the same period a year ago. That reduced US gas storage to 1.5 tcf, 324 bcf below year-ago levels but still 185 bcf above the 5-year average.
In London, the expiring April IPE contract for North Sea Brent crude increased by 16¢ to $61.06/bbl. April gas oil lost $6.75 to $531/tonne.
The average price for OPEC's basket of 11 benchmark crudes dropped 11¢ to $57.14/bbl on Mar. 14.
Contact Sam Fletcher at [email protected].