Energy prices slipped in profit-taking Mar. 2, ending a 7-day rally of consecutive gains on the New York market that had not been matched “since last year early in the summer,” said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.
The April contract for benchmark US light, sweet crudes dipped by 36¢ to $61.64/bbl Mar. 2 on the New York Mercantile Exchange yet still ended the session 1% higher than where it opened at the beginning of the week. Earlier, the front-month contract broke the $62/bbl barrier to an intraday trading high of $62.49/bbl on Mar. 1. The April contract for reformulated blendstock for oxygenate blending (RBOB) was down 0.83¢ to $1.90/gal on Mar. 2, yet up 7% from its Feb. 26 opening price on NYMEX.
The trading pattern remained similar during most of that week, with crude “pulled higher by a very firm gasoline complex and pulled lower by the spillover of the equity scare” from the Feb. 27 sell-off in global stock markets, Jakob said. The sell-off, which took 9% off the China Shanghai Composite Index, resulted in part from the Chinese government’s crackdown on speculation that had pushed Chinese stock prices to record levels (OGJ Online, Feb. 28, 2007). The US stock market appeared to rebound in Feb. 28 trading, however.
There were still fears in some quarters that China’s energy demand may be slowing. However, Jakob reported that in January China for the first time became a net importer of coal. That changeover wasn’t expected until later this year. Moreover, it represented “a major structural change not only for the global coal trade but for the global energy balances; yet it has gone barely noticed as the numbers came out at the same time as the Shanghai stock exchange collapse,” Jakob said. “Chinese power and energy demand is not decreasing, and it would be wrong to discount it on the basis of local stock market gyrations.”
Analysts in the Houston office of Raymond James & Associates Inc. reported crude futures prices were down in early trading Mar. 5 following steep dives in the Asian and European equity markets. The Nikkei index was down over 3%, and increasing strength in the yen-the apparent unwinding of the currency carry trade-induced a massive global sell-off that seemed poised to carry into US trading that day.
However, as Raymond James analysts noted, oil prices remained relatively strong, supported by tensions with Iran and concerns about gasoline supply as the driving season approaches. Gas use was expected to moderate as temperatures rose across the US West and parts of the eastern seaboard.
US inventories
The market was boosted by a report by the Energy Information Association that commercial US gasoline stocks declined for the third consecutive week, down 1.9 million bbl to 220.2 million bbl in the week ended Feb. 23. Distillate fuel inventories dropped 3.8 million bbl to 124.5 million bbl. Crude inventories, however, gained 1.4 million bbl to 329 million bbl (OGJ Online, Feb. 28, 2007). Propane and propylene inventories declined by 2.8 million bbl to 31.9 million bbl.
Imports of crude into the US were down by 220,000 b/d to 9.5 million b/d that week, partly because lightering operations were disrupted by fog along the Houston Ship Channel. However, the input of crude into US refineries increased by 196,000 b/d to 14.6 million b/d with units operating at 86% of capacity. Gasoline production increased slightly to 8.7 million b/d; distillate fuel production increased to 3.9 million b/d.
“Overall US stocks (including propane) have drawn down 42 million bbl over the last month and are now 23 million bbl below last year. Excluding propane, stocks have drawn down 22 million bbl over the month and are 16 million bbl below last year,” said Jakob of Petromatrix.
The 4-week average of crude imports into the US through Feb. 23 was 390 million b/d lower than in the same period last year, while gasoline imports were down by 266 million b/d. The 4-week average of gasoline production was up by 328 million b/d from a year ago when refinery runs were still recovering from damage by Hurricanes Katrina and Rita. The resulting imbalance of lower imports and higher demand resulted in a gasoline stock draw of 4.4 million bbl over the latest 4-week period, compared to builds of 3.5 million bbl in February 2006 and 7.1 million bbl in February 2005, Jakob said.
(Online Mar. 5, 2007; author’s e-mail: [email protected])
