Sam Fletcher
Senior Writer
HOUSTON, Feb. 7 -- Crude prices continued to fall Feb. 6 after the US Energy Information Administration reported the largest 1-week gain in commercial US inventories since March 2004 as refiners slowed operations in the face of weak margins and oil imports climbed.
"Refinery utilization continues to decrease and has now reached levels not seen since March of 2006," said analysts in the Houston office of Raymond James & Associates Inc.
EIA reported commercial US crude inventories rose by 7 million bbl to 300 million bbl in the week ended Feb. 1 (OGJ Online, Feb. 6, 2008). Gasoline stocks increased by 3.6 million bbl to 227.5 million bbl—the highest level since February 1999—while distillate fuel inventories gained 100,000 bbl to 127.1 million bbl. "Both heating oil and diesel inventories should be drawing fast at this point, but they have instead risen," said Paul Horsnell at Barclays Capital Inc., London.
However, Eitan Bernstein, analyst with Friedman, Billings, Ramsey & Co. Inc., said, "It is important to note that inventories typically rise this time of year. Gasoline inventories are currently in line with comparable year-ago levels and will most likely begin declining over the coming month as spring maintenance season reduces production and demand seasonally increases. Despite the negative inventory data, most of the refiner stocks are currently up nearly 1%, which suggests to us that the market is starting to look a little longer term and getting more positive on the space." He noted other indicators that "suggest imports should drop over the coming weeks."
Nonetheless, the latest statistics "were such a sentiment killer that even the news of force majeure on Nigerian export of Bonny Light could not move crude [prices] away from the lows," said Olivier Jakob at Petromatrix, Zug, Switzerland. Royal Dutch Shell PLC said curtailment of 130,000 b/d in crude exports will extend through March because of failure to complete pipeline repairs.
Jakob said, "The Nigerian news was a bit confusing as it came out just after another press release that some Forcados production was starting again. The lack of reaction from this potential bullish development on Bonny flows illustrates a market that wants to have a full confirmation of disruptions rather than taking a chance."
Energy prices
The March crude contract of benchmark US sweet, light crudes fell $1.27 to $87.14/bbl Feb. 6 on the New York Mercantile Exchange. Front-month crude prices on NYMEX the New York futures market have declined 13% from an all-time high of $100.09/bbl on Jan. 3.
The April contract dropped $1.23 to $87.22/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.27 to $87.15/bbl. The March heating oil contract lost 2.77¢ to $2.42/gal on NYMEX. The March contract for reformulated blend stock for oxygenate blending (RBOB) declined 2.48¢ to $2.24/gal.
The March natural gas contract continued to climb, up 5.2¢ to $7.99/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., rose 7.5¢ to $7.92/MMbtu.
In London, the March IPE contract for North Sea Brent lost $1.04 to $87.78/bbl. Gas oil for February was unchanged at $784.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 benchmark crudes dropped $1.34 to $84.87/bbl on Feb. 6.
Contact Sam Fletcher at [email protected].