Sam Fletcher
Senior Writer
HOUSTON, Apr. 3 -- The near-month crude futures contract escalated by nearly $4/bbl Apr. 2 on the New York market as traders ignored a big increase in US oil inventories and focused on signs of a weakening US economy.
The May crude contract fell more than $1 immediately after the Energy Information Administration issued its weekly inventories report and while the US dollar was trading higher against the euro on money markets. But the crude price rebounded in afternoon trading as the euro hit an intraday high of $1.57 on word that the International Monetary Fund would lower its forecast for US economic growth.
Also, in a congressional committee hearing, Federal Reserve Chairman Ben Bernanke said for the first time that the US may be facing a recession this year.
Analysts in the Houston office of Raymond James & Associates Inc. noted: "A lot of attention…was given to Bernanke's testimony to Congress about the state of the economy. Both bulls and bears found something to draw on from the Fed chairman's speech. On the bearish side, Bernanke seems ready to admit that the US is facing a recession. However, on a bullish note, he stated that he believes the economy will pick up in the second half of 2008." They said that, "somewhat surprisingly" oil traders shook off the EIA report of a much larger-than-expected build in crude inventories and drove prices higher during the session.
US inventories
EIA said Apr. 2 that commercial US crude inventories jumped 7.4 million bbl to 319.2 million bbl in the week ended Mar. 28. Gasoline inventories fell more than expected, down 4.5 million bbl to 224.7 million bbl in the same week. Distillate fuel stocks dropped 1.6 million bbl to 109.7 million bbl. Propane and propylene inventories were down 500,000 bbl to 24.9 million bbl.
Imports of crude into the US increased 1.4 million b/d to 10.3 million b/d in the same period. Input of crude into US refineries was up 72,000 b/d to 14.2 million b/d, with refineries operating at 82.4% of capacity.
"With a crude build offsetting a seasonal gasoline draw, making for an overall stock build to levels at par to last year, the statistics can only be described as neutral," said Olivier Jakob at Petromatrix, Zug, Switzerland.
Energy prices
The May contract for benchmark US sweet, light crudes shot up $3.85 to $104.83/bbl Apr. 2 on the New York Mercantile Exchange. The June contract jumped by $3.76 to $104.28/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $3.86 to $104.84/bbl. The new front-month May contract for reformulated blend stock for oxygenate blending (RBOB) escalated 13.44¢ to $2.77/gal on NYMEX. Heating oil for the same month increased 7.13¢ to $2.95/gal.
The June natural gas contract advanced by 10.8¢ to $9.83/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., jumped 53¢ to $9.56/MMbtu.
In London, the May IPE contract for North Sea Brent crude gained $3.58 to $103.75. However, gas oil for April lost $3.25 to $923.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes advanced 72¢ to $96.47/bbl on Apr. 2.
Contact Sam Fletcher at [email protected].