Market watch: Expiring gasoline contract triggers futures market decline

By OGJ editors

HOUSTON, Aug. 1 -- Reports that ChevronTexaco Inc. was lifting force majeure restrictions on oil exports from one of its terminals in Nigeria, in conjunction with the typical volatility of the last trading day for a near-month contract, combined to push down gasoline futures prices Wednesday in New York.

Energy futures prices also were adversely impacted by a US Department of Energy report of US inventories of oil and petroleum products early Wednesday that conflicted with a similar report by the American Petroleum Institute late Tuesday, analysts said.

DOE officials said US oil stocks declined by 2 million bbl last week, while the API reported an increase of 873,000 bbl. Government officials said distillate inventories increased by 1.1 million bbl, compared with a decline of 32,000 bbl reported by API. Both agreed that US gasoline stocks were down, but DOE figured a more conservative decline of 1 million bbl, while API pegged the loss at 1.4 million.

The expiring August contract for unleaded gasoline dropped 2.58¢ to 83.03¢/gal on the New York Mercantile Exchange, wiping out the previous day's gain of 2.45¢ that was triggered by reports of refinery outages in Nigeria and Saudi Arabia. Heating oil for the same month lost 1.23¢ to 67.64¢/gal.

The fall of gasoline prices undermined oil futures in both New York and London. Benchmark US sweet, light crudes for September delivery dropped 34¢ to $27.02/bbl on NYMEX, while the October position was down 35¢ to $26.47/bbl.

However, the September natural gas contract jumped by 6.3¢ to $2.95/Mcf in what analysts at Enerfax Daily described as "a dead day until the last half hour" of NYMEX trading.

"With the hot weather in the East, traders sold a cash market as much as 10¢(/Mcf) higher than the NYMEX instead of putting volumes into storage," they reported. "At the New York Citygate, spot prices jumped over $10/MMbtu before averaging $7.94/MMbtu. Also, a lack of liquidity has forced some companies to cover positions left open by companies forced to abandon the market because of credit issues."

The Enerfax analysts advised, "Look for prices to rebound somewhat in August due to more summer heat as well as the beginning of this year's active hurricane season."

Meanwhile, the US Energy Information Administration reported Thursday that 60 bcf of gas was injected into US underground storage last week, down from 64 bcf the previous week and 68 bcf during the same period a year ago. US gas storage now surpasses 2.5 tcf, with surpluses of 326 bcf year-over-year and 368 bcf compared with the 5-year average.

In London, the September futures price for North Sea Brent crude dropped 24¢ to $25.44/bbl on the International Petroleum Exchange. Prices will likely remain at that level, barring emergence of strong follow-through sales, brokers said.

The September natural gas contract inched up 0.3¢ to the equivalent of $1.97/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined 6¢ to $25.28/bbl Wednesday.