MARKET WATCH: Oil prices recover from day-earlier losses

Sept. 2, 2010
Oil prices in the New York market recovered Sept. 1 from heavy losses a day earlier, lifted by better-than-expected macroeconomic data, analysts said.

By OGJ editors
HOUSTON, Sept. 2
-- Oil prices in the New York market recovered Sept. 1 from heavy losses a day earlier, lifted by better-than-expected macroeconomic data, analysts said. The front-month crude contract gained nearly $2 to settle at $73.91/bbl on the New York Mercantile Exchange.

“The bounce back in prices was fueled by the release of better-than-expected economic data from China and the US, which were indicative of a moderation in global manufacturing activity rather of a sharp slowdown,” said Barclays Capital analysts.

The price gains happened in spite of a US Department of Energy report showing a further large increase in US crude oil inventories over the prior week, analysts said.

Olivier Jakob at Petromatrix in Zug, Switzerland, said, “The market did not spend more than 30 sec looking at the DOE data yesterday. The ISM Manufacturing Index came in better than expected and it was off to the races.”

Jakob said, “The ISM was 0.8 points better than the July number, but flat with June. Production was higher than July but new orders were lower and at the lowest level since June 2009. The numbers are therefore not exceptionally good compared to the year-to-date numbers but the ISM at 56.3 was much better than the bearish expectations of 53.”

Analysts in the Houston office of Raymond James & Associates Inc. reported, “Crude once again took its cues from the broader market, surging 2.8% despite a bearish DOE update, which showed a larger-than-expected increase in US crude inventories. Keep an eye on Cushing inventories, which continue to soar to all-time highs, as stockpiles are now over 50 million bbl (7%) above last year's record levels. Energy stocks followed along with the market and crude as the OSX rose 4.8% and the EPX jumped 6.7%.”

Meanwhile, Raymond James analysts said, “Natural gas ignored the rally and fell 1.4%.”

The Energy Information Administration reported the injection of 54 bcf of natural gas into US underground storage in the week ended Aug. 27. That brought working gas in storage to more than 3.1 tcf. That is 208 bcf less than was in storage last year at this time but 169 bcf above the 5-year average.

Earlier EIA said commercial US crude inventories gained 3.4 million bbl to 361.7 million bbl in the week ended Aug. 27. Gasoline stocks dropped 200,000 bbl to 225.4 million bbl. Finished gasoline inventories decreased while blending components increased. Distillate fuel inventories fell 700,000 to 175.2 million bbl (OGJ Online, Sept. 1, 2010).

Energy prices
The October contract for benchmark US light, sweet crudes gained $1.99 to $73.91/bbl on the New York Mercantile Exchange. The November contract advanced $1.82 to $75.36/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.99 to $73.91/bbl. Heating oil for October delivery rose 4.94¢ to $2.04/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 3.17¢ to $1.89/gal.

The October natural gas contract fell 5.4¢ to $3.76/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., rose 3¢ to $3.82/MMbtu.

In London, the October IPE contract for North Sea Brent crude gained $1.71 to $76.35/bbl. Gas oil for September was up $4.25 to $645.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 10¢ to 72.49/bbl.