Front-month oil and gas futures prices declined Oct. 24 with crude dropping 1% following a bearish report of increased inventory while natural gas fell 2% in the New York market among mixed economic indicators.
“Yesterday’s mild improvement in the Hong Kong & Shanghai Banking Corp. Ltd.’s flash Purchasing Manager Index manufacturing reading for China was not enough to sustain interest in energy markets. Negative sentiment soon returned and was only compounded by the dramatic increase in the [Energy Information Administration’s] reported crude oil inventories,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.
EIA said commercial US crude inventories jumped 5.9 million bbl to 375.1 million bbl in the week ended Oct. 19, far exceeding Wall Street’s consensus for an increase of 1.8 million bbl. Gasoline stocks for the same week climbed 1.4 million bbl to 198.6 million bbl, above analysts’ outlook for a 500,000 bbl gain. Both finished gasoline and blending components were up. Distillate fuel inventories declined 600,000 bbl to 118 million bbl. Analysts were expecting a bigger decrease of 1.2 million bbl (OGJ Online, Oct. 24, 2012).
Lower-than-average distillate levels could lead to increased drawdown of crude stocks as winter demand for heating oil increases. “However, this turnaround could still be weeks away, so for now the extremely high crude oil inventories coupled with a sharp drop in implied demand for gasoline (it appears as though high prices continue to weigh on demand) are a concern.”
EIA reported Oct. 25 the injection of 67 bcf of natural gas into US underground storage last week, matching Wall Street’s consensus and raising the working gas in storage to 3.843 tcf. US gas storage is now 153 bcf above year-ago levels and 251 bcf above the 5-year average.
In other news, US Treasuries prices declined due to profit taking Oct. 24 and in early trading Oct. 25 after Federal Reserve officials voted to keep interest rates “ultralow” until mid-2015. Equity market stocks “barely reacted to [the Fed’s] announcement amid a mixed day of corporate earnings, closing marginally down,” said analysts in the Houston office of Raymond James & Associates Inc.
“Another central bank across the pond was also busy defending its active money-printing plan. The European Central Bank president dismissed German lawmakers' perpetual fear about having to carry around money in wheelbarrows and argued that deflation was actually the greater risk,” Raymond James analysts reported. The SIG Oil Exploration & Production Index and the Oil Service Index continued declining, down 3% and 2%, respectively.
Ground said, “The Fed’s statement appears to have done enough to steady markets, but we don’t foresee any sustained quantitative-easing induced rallies to emerge.”
The US Department of Commerce reported US orders for durable goods escalated 9.9% in September, the biggest increase in nearly 3 years. However, the gain came primarily from a rebound in aircraft orders that had fallen heavily in August when durable goods orders as a whole were down 13.2%. Eliminating transportation, orders for other durable goods were up only 2% in September with orders for capital goods unchanged.
The US Department of Labor reported 369,000 new applications for unemployment benefits last week, down from a revised 392,000 initial applications the previous week.
Energy prices
The December and January contracts for benchmark US light, sweet crudes lost 94¢ each to reach $85.73/bbl and $86.29/bbl, respectively, on the New York Mercantile Exchange. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down 94¢ to $85.73/bbl in step with the front-month futures closing.
Heating oil for November delivery slipped 0.4¢ but closed essentially unchanged at a rounded $3.04/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.2¢ to $2.60/gal.
The November natural gas contract fell 8.5¢ to $3.45/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., regained 8.3¢ to $3.43/MMbtu.
In London, the December IPE contract for North Sea Brent lost 40¢ to $107.85/bbl. Gas oil for November was up $2.25 to $957/tonne.
The Vienna office of the Organization of Petroleum Exporting Countries is closed Oct. 25-26 with no updates on the basket price of its 12 benchmark crudes.
Contact Sam Fletcher at [email protected].
