Sam Fletcher
OGJ Senior Writer
HOUSTON, Apr. 30 -- The new front-month June contract for natural gas fell below $4/MMbtu Apr. 29 in the New York market after a Department of Energy agency reported a bigger-than-expected injection into US gas underground storage.
The price of crude rose more than 2% as Greece appeared to move closer to a bailout agreement. Oil prices climbed with the broader equity rally with the Dow Jones Industrial Average up 120 points.
DOE’s Energy Information Administration reported the injection of 83 bcf of gas into US underground storage in the week ended Apr. 23, up from the Wall Street consensus of 70 bcf. That put the amount of working gas in storage over 1.9 tcf, up 101 bcf from a year ago and 303 bcf above the 5-year average.
Meanwhile, DOE said US demand for petroleum products for February was 500,000 b/d less than earlier indicated in its weekly reports during that month. It revised February gasoline demand lower by 181,000 b/d but raised distillate demand by 128,000 b/d.
“The revision to gasoline demand changes from a first estimate of plus 0.2% to a revised number of minus 1.8%. The downward revision to gasoline was to be expected based on the vehicle-miles-travelled [report] for February, which showed a 2.9% decline vs. last year,” said Olivier Jakob at Petromatrix, Zug, Switzerland. “Total demand for products was 154,000 b/d higher than a year ago, mostly due to growth of demand for LPGs,” he said.
Jakob observed, “The US was again a net exporter of distillates during February, and this despite the very harsh winter conditions. Ethanol production reached a new record high during February and is 193,000 b/d higher than a year ago.”
Imports of crude from members of the Organization of Petroleum Exporting Countries were unchanged from January and 267,000 b/d lower than a year ago, and for the first 2 months of the year are 1.4 million b/d lower than in 2008. “Imports of Saudi Arabia remain on the low side, and the US remains in a new era where ethanol production is basically at par to the crude oil imports from Saudi Arabia,” said Jakob.
“The DOE downward revision to February oil demand is not a positive input, but the immediate focus is not on what happened 2 months ago but on what might happen this weekend in the US gulf with the extension of the oil spill,” he said.
The oil spill from the deepwater blowout in the Gulf of Mexico could disrupt oil imports along the US Gulf Coast. “Other things being equal,” Jakob said, “that would result in crude oil stock draws in the US, and the backed-up crude oil [imports] would force some redirection of barrels towards Europe, which would then pressure the [North Sea] Brent timespreads lower and force Brent back to a discount to West Texas Intermediate.”
He said, “The oil spill brings a level of uncertainty that can not be ignored as one does not know for sure the weather that we will have for the next few days, hence what direction the spill could take. At this stage, however, we can point to a few things. First, the Louisiana Offshore Oil Port [the only US port capable of unloading very large crude carriers] is to the west of the spill and given the estimated path of the spill it does not look like that it will be impacted. The Mississippi waterway is at a greater risk, but here again based on the estimated path it does seem that the South West Pass will not be greatly impacted. Ultimately, if there is any disruption to crude oil imports, the US Strategic Petroleum Reserve will be released.”
In other news, Valero Energy Corp. is assessing damage and investigating the cause of an Apr. 29 fire at a selective hydrogenation unit at its 195,000-b/d refinery in Memphis. Damage appears relatively minor, with no other units affected, according to company officials. “Any delay to restarting the refinery’s FCC unit from its current turnaround is expected to be minimal, and no disruption to fuel supply is expected. There were no offsite environmental hazards related to the incident. The US Coast Guard responded and verified that there was no product released to waterways,” a spokesman said.
One Valero employee was reported in stable condition at a regional burn unit after the fire. Two other workers were treated for minor injuries at the scene.
Energy prices
The June contract for benchmark US light, sweet crudes climbed by $1.95 to $85.17/bbl Apr. 29 on the New York Mercantile Exchange. The July contract gained $1.58 to $87.25/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.95 to $85.17/bbl in lock-step with the front-month futures contract. Heating oil for May delivery increased 2.22¢ to $2.25/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month advanced 2.29¢ to $2.36/gal.
The June natural gas contract dropped 36.8¢ to $3.98/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was down 10.5¢ to $4.11/MMbtu.
In London, the June IPE contract for North Sea Brent crude increased 74¢ to $86.90/bbl. Gas oil for May gained $18 to $728.25/tonne.
The average price for OPEC’s basket of 12 reference crudes was up $1.46 to $83.59/bbl.
Contact Sam Fletcher at [email protected].
