Market watch: Energy futures post generally modest gains
By OGJ editors
HOUSTON, Aug.15 -- Energy futures prices registered generally moderate gains Wednesday in the wake of reports of unexpectedly large draws last week from US inventories of oil and petroleum products.
Markets might have seen more price volatility, said analysts, if not for discrepancies between the inventory numbers reported late Tuesday by the American Petroleum Institute and those presented early Wednesday by the Energy Information Administration of the US Department of Energy.
EIA officials reported US stocks of crude declined by 7.2 million bbl last week, while the API put that draw at 9.5 million. US gasoline inventories were down by 4.5 million bbl during the same period, said EIA officials; API reported a smaller draw of 3.9 million. US distillate stocks were down by 1.1 million bbl, EIA reported, while API quoted a higher figure of 1.5 million bbl.
"This week's drop in crude oil inventories, while large, to our knowledge does not reflect any significant change in market factors," said EIA officials, who described the draw as "a continuation of a stronger-than-normal falloff that began in May."
US oil inventories of nearly 300 million bbl for the week ended Aug. 9 "leaves crude oil about 10 million bbl over the low end of the normal band," said EIA officials. "With crude oil prices swinging between $26-28/bbl and futures markets in backwardation (i.e., contract prices in future months are lower than today's prices), refiners have little incentive to hold crude oil inventories.
Furthermore, gasoline and distillate inventories remain on the high side for this time of year, indicating refiners can turn to product inventory to cover short-term unexpected demand needs without drawing on additional crude oil."
The EIA noted, "US gasoline demand continues to show resilience against the backdrop of recent events that, when combined, have the potential to significantly slow the rate of growth in demand experienced so far this year. And with only one of the three national holidays of summer remaining, the US ostensibly has adequate supplies of gasoline to meet expected demand through the Labor Day holiday, barring any major petroleum infrastructure problems between now and then."
The September contract for benchmark US sweet, light crudes gained 25¢ Wednesday to $28.15/bbl on the New York Mercantile Exchange, while the October contract climbed 32¢ to $27.51/bbl. Heating oil for September delivery was up 0.72¢ to 70.14¢/gal. Unleaded gasoline for the same month rose 0.26¢ to 77.64¢/gal.
However, the September natural gas contract dropped 6.5¢ to $2.91/Mcf on NYMEX. Analysts at Enerfax Daily reported that contract had rallied to $3.04/Mcf on short covering by traders and locals earlier Wednesday, before collapsing "on funds' and locals' selling." They advised, "After the market finished near its low yesterday, expect it to test support levels from $2.88 down to $2.80(/Mcf)" during Thursday's trading session.
Meanwhile, the EIA reported Thursday that 53 bcf of natural gas was injected into US underground storage during the week ended Aug. 9. That's up from injections of 33 bcf the previous week and 46 bcf during the same period a year ago, but below Wall Street's most recent consensus. US gas storage now stands at 2.62 bcf, which equates to surpluses of 279 bcf year-over-year and 333 bcf over the 5-year average, said officials at Salomon Smith Barney Inc.
In London, the September contract for North Sea Brent oil increased by 20¢ to $26.38/bbl on the International Petroleum Exchange. The September natural gas contract gained 1.9¢ to the equivalent of $1.95/Mcf on the IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was up 26¢ to $25.88/bbl Wednesday.