Sam Fletcher
OGJ Senior Writer
HOUSTON, Dec. 22 -- The new front-month February contract increased 1.1% on Dec. 21 in the New York market upon expectations of an improved economy and stronger demand for energy.
The Standard & Poor’s 500 index rose 0.6% to close at its highest level since the collapse of Lehman Brothers in September 2008. “Taking the cue from crude, energy stocks outperformed,” said analysts in the Houston office of Raymond James & Associates Inc.
Natural gas, however, fell 4.4% on forecasts for milder temperatures next week. Raymond James analysts said oil prices were higher and gas prices were lower in early trading Dec. 22.
Major stock indexes were up slightly following a Dec. 22 Commerce Department report the country's gross domestic product rose at an annual rate of 2.6% between July and September, a small increase from its earlier estimate of 2.5%. Analysts expected the number to rise to 2.8%. Separately, the National Association of Realtors reported sales of existing homes rose 5.6% in November, slightly below estimates.
Oil prices edged higher initially Dec. 21before receiving a boost from an American Petroleum Institute report of a large crude inventory draw, said James Zhang at Standard New York Securities Inc., the Standard Bank Group. Middle distillate cracks strengthened, while reformulated blend stock for oxygenate blending (RBOB) cracks weakened slightly despite the API’s flat distillate inventory figures and a big draw in gasoline stocks.
“So far this year, front month West Texas Intermediate and North Sea Brent crude gained 11% and 17% respectively,” said Zhang. Both have traded within $70-90/bbl throughout the year. He said, “During the same period, the December 2013 contracts for WTI and Brent moved up by only 88¢/bbl and $2.45/bbl respectively, resulting in much tighter term structures. The term structures are likely to tighten further as we head into the New Year, reflecting the likelihood of continuous inventory draw-downs during this period.”
US inventories
The Energy Information Administration said Dec. 22 commercial US crude inventories fell 5.3 million bbl to an above-average 340.7 million bbl in the week ended Dec. 17, exceeding Wall Street’s consensus for a 3.4 million bbl drop. Gasoline stocks grew by 2.4 million bbl to 217.2 million bbl, EIA reported, outstripping analysts’ predictions of a 1.5 million bbl increase. Gasoline stocks also are above average for this time of year with both finished gasoline and blending components increasing. Distillate fuel inventories decreased 600,000 bbl to 160.7 million bbl, just above average. The markets had expected no change.
The API earlier reported crude stocks fell 5.8 million bbl to 342 million bbl in the week ended Dec. 17. Gasoline inventories dropped 2.9 million bbl to 219.5 million bbl, while distillate stocks dipped just 16,000 bbl to 161.3 million bbl, API said.
EIA said imports of crude into the US increased by 1.1 million b/d to 8.7 million b/d in the same week. Over the 4 weeks through Dec. 17, US imports of crude averaged 8.5 million b/d, up 479,000 b/d from the comparable 4-week period in 2009. Total gasoline imports averaged 1million b/d last week. Distillate fuel imports averaged 217,000 b/d.
Input of crude into US refineries decreased 48,000 b/d to 14.9 million b/d in the week ended Dec. 17, with units operating at 87.7% of capacity. Gasoline production increased to 9.5 million b/d while distillate fuel production increased to 4.6 million b/d.
Energy prices
The new front-month February contract for benchmark US light, sweet crudes gained 45¢ to $89.82/bbl on the New York Mercantile Exchange. The March contract climbed 48¢ to $90.64/bbl. On the US spot market, WTI at Cushing, Okla., was up 41¢ to $89.22/bbl. Heating oil for January delivery advanced 2.69¢ to $2.52/gal on NYMEX. RBOB for the same month increased 2.07¢ to $2.40/gal.
The January natural gas contract fell 17.8¢ to $4.06/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 5.2¢ to $4.15/MMbtu.
In London, the February IPE contract for North Sea Brent crude was up 46¢ to $93.20/bbl. Gas oil for January increased $12.50 to $776.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained 95¢ to $89.54/bbl.
Contact Sam Fletcher at [email protected]
Rystad Energy.
