Market Journal

Latin American refinery expansions planned this decade will not be enough to stem the region's growing dependence on imported US fuels, said analysts at Deutsche Bank AG (DB).

The unusual persistent price dislocation between West Texas Intermediate and other benchmark crudes is affecting returns to commodity investors, said analysts at Barclays Capital in London.

Markets shrugged off the International Energy Agency’s release of 60 million bbl of crude and petroleum products from emergency government supplies in a vain attempt to drive down energy prices.

The plan to release emergency oil stocks held by the US and other countries to push down high crude prices almost worked—for about a week.

The International Energy Agency’s decision to release 60 million bbl of crude and petroleum products from the strategic petroleum reserves is “the equivalent of QE2 in the oil market,” said Barclays Capital analysts.

Energy prices fell sharply June 15 with the August North Sea Brent contract dropping more than $6/bbl, wiping out “all gains of the last 15 trading days” and closing its price spread vs. West Texas Intermediate to “the weakest level” since March, said Olivier Jakob at Petromatrix, Zug, Switzerland.

US President Barack Obama and members of his administration again talked of dipping into the US Strategic Petroleum Reserve as energy prices climbed June 8 after ministers of the Organization of Petroleum Exporting Countries failed to change production at an acrimonious meeting in Vienna.

Neither consumers nor governments are unhappy about high oil prices—as long as they are not too high, said Fereidun Fesharaki, chairman of FACTS Global Energy group.

May was “a rather odd month” for the oil market with “some unusually sharp swings in prices and sentiment” despite no dramatic change in market fundamentals, said Paul Horsnell, managing director and head of commodities research at Barclays Capital.

The health of the US economy is “one of the biggest risks to the oil market,” which is likely to remain “biased on the cautious side while awaiting clearer signs” of recovery, said James Zhang at Standard New York Securities Inc., the Standard Bank Group.