Sam Fletcher
OGJ Senior Writer
HOUSTON, Aug. 19 -- The front-month crude price dropped 2.5% in morning trading Aug. 18 in the New York market on a government report US oil and petroleum product stockpiles hit a 27-year combined high of 1.13 billion bbl, but the loss was reduced to 0.5% for the day as the broader equity market strengthened.
“Prices have come under pressure as fuel stockpiles continue to rise due to the anemic demand even during the driving season, when fuel inventories normally decline,” said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston.
The front-month natural gas contract was down 0.7% on Aug. 18 “as temperatures are expected to be largely in the normal range across much of the eastern US over the coming week,” Sharma said. “Moderating temperatures are likely to result in the disappearance of below-normal storage injections we have been seeing due to a hotter-than-normal summer so far.”
The Energy Information Administration said commercial US benchmark crude inventories declined 800,000 bbl to 354.2 million bbl in the week ended Aug. 13, not quite as low as the Wall Street consensus for a 1 million bbl decrease. Gasoline stocks remained virtually unchanged at 223.3 million bbl, compared with market expectations of a 400,000 bbl dip. Finished gasoline inventories decreased while blending components inventories increased. Distillate fuel inventories were up 1.1 million bbl to 174.2 million bbl, below the consensus for a 1.5 million bbl increase (OGJ Online, Aug. 18, 2010).
EIA reported Aug. 19 the injection of 27 bcf of natural gas into US underground storage in the week ended Aug. 13, slightly below the Wall Street consensus of 30 bcf. That put working gas in storage at 3.01 tcf, down 185 bcf from the comparable period in 2009 and 196 bcf above the 5-year average.
Storage problems
Olivier Jakob at Petromatrix, Zug, Switzerland, said, “The stocks of gasoline and distillates combined have reached a new record high, and we do believe that the US is currently testing the full storage capacity for clean petroleum products. The onshore stockbuild will have to slow down very quickly purely for the reason that the US is getting closer to the limit where it has no more spare tank capacity for petroleum stocks,” Jakob said.
This should result in either forced reduction of refinery runs “or maximization of export economics for products,” he said. “Stocks of gasoline are not being reduced and with imports remaining relatively large (1.1 million b/d for the week and the 4-week average) we have to fear that stocks will stay at an elevated level until the US refineries are forced by economics to shut down.”
Jakob said, “The only place where we can find a little bit of storage space left is for crude oil in the US Gulf Coast where there is still probably 20 million bbl [of storage] available. Cushing, Okla., had a reduction of 700,000 bbl, but the absolute levels are still historically very high. Crude imports from Canada have been easing, but that should translate into building stocks up north, which should then start to price themselves at a deeper discount to be forced back into Cushing.”
In other news, the US Labor Department said Aug. 19 first-time claims for jobless benefits increased by 12,000 to 500,000 last week, the highest level since November. It marked the third consecutive week initial unemployment claims increased.
Energy prices
The September contract for benchmark US light, sweet crudes dropped 35¢ to $75.42/bbl Aug. 18 on the New York Mercantile Exchange. The October contract fell 38¢ to $75.78/bbl. On the US spot market, WTI at Cushing was down 35¢ to $75.42/bbl. Heating oil for September delivery dipped 0.1¢ to $2.02/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month continued to climb, however, up 0.8¢ to $1.96/gal.
The September natural gas contract dropped 2.8¢ to $4.24/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 2.5¢ to $4.34/MMbtu.
In London, the October IPE contract for North Sea Brent crude was down 46¢ to $76.47/bbl, still at a premium to WTI. Gas oil for September dropped $8.75 to $639.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes lost 20¢ to $73.05/bbl.
Contact Sam Fletcher at [email protected].
