Sam Fletcher
OGJ Senior Writer
HOUSTON, Sept. 22 -- Oil prices dropped Sept. 21 with the October crude contract down 1.8% its last trading day on the New York market despite a “short-lived” rally earlier on the weak dollar and Federal Reserve officials’ proclaimed willingness to expand measures to support the US economy “if needed.”
Following its Sept. 21 meeting, the Federal Open Market Committee, the policy-making arm of the Federal Reserve Bank, said it is “prepared to provide additional accommodation if needed to support the economic recovery,” citing rising but moderate business investment, continued high unemployment, and a depressed housing market.
“Not surprisingly, the tone out of the Fed carried an all too familiar caution—holding target rates stable and continuing to cite a ‘modest’ pace of economic recovery,” said analysts in the Houston office of Raymond James & Associates Inc. “No move towards further credit easing, at least as of yet.”
Olivier Jakob at Petromatrix, Zug, Switzerland, warned, “The problem remains that the more the Fed acts to artificially support the financial markets, the more assets are retrieved by retail investors as confidence in the system is negatively correlated to the Fed’s intervention.” Meanwhile, he reiterated, “Paying 21% a year in contango cost to hold a crude oil index as a hedge against inflation is a losing proposition.”
Jakob added, “Engaging in a currency war is a negative spiral for world growth; hence we remain very skeptical that the lower dollar that seems to be wanted by the Fed will result in any sustained additional demand for oil.”
Raymond James analysts said, “Natural gas prices rebounded a bit after [Sept. 20]’s losses, climbing 2.5% on renewed…hurricane-related fears.”
In other news, Jakob said the latest MasterCard Spending Pulse report on retail gasoline sales at the pump shows an increase of 1.9% from the previous week. “But the 4-week average is at the lowest level of the year (even lower than during the winter blizzards) and unchanged from a year ago,” he said.
US inventories
The Energy Information Administration said Sept. 22 commercial US crude inventories increased 1 million bbl to 358.3 million bbl in the week ended Sept. 17. The Wall Street consensus was for a decline of 1.8 million bbl. Gasoline stocks climbed by 1.6 million bbl to 226.1 million bbl, opposite market expectations for a 300,000 bbl decline. Both finished gasoline and blending components increased. Distillate fuel inventories gained 300,000 bbl to 174.9 million bbl, outstripping market expectations of a 100,000 bbl increase.
Imports of crude into the US increased by 295,000 b/d to 9.3 million b/d in the same period, EIA reported. Crude imports averaged 9.2 million b/d in the 4 weeks ended Sept. 17, down 114,000 b/d from the comparable period in 2009. Total gasoline imports averaged 850,000 b/d last week, with distillate fuel imports at 203,000 b/d.
The input of crude into US refineries increased only 41,000 b/d to 15 million b/d last week with units operating at 87.8% of capacity. Gasoline production decreased to 9 million b/d. Distillate fuel production decreased to 4.3 million b/d.
Energy prices
The October contract for benchmark US light, sweet crudes fell $1.34 to $73.52/bbl Sept. 21 on the New York Mercantile Exchange. The November contract dropped $1.22 to $74.97/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.34 to $73.52/bbl. Heating oil for October delivery declined 1.95¢ to $2.12/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month retreated 3¢ to $1.92/gal.
The October natural gas contract recaptured 9.7¢ to $3.92/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was up 4.5¢ to $4/MMbtu.
In London, the November IPE contract for North Sea Brent crude dropped 90¢ to $78.42/bbl. Gas oil for October lost $2 to $680.25/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes increased 8¢ to $75.34/bbl.
Contact Sam Fletcher at [email protected].
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