Market watch: Energy prices slip with conflicting stock reports

By OGJ editors

HOUSTON, June 20 -- Energy futures prices slipped Wednesday as traders tried to reconcile conflicting reports of US petroleum inventories.

The American Petroleum Institute reported late Tuesday that US crude inventories increased by 2.53 million bbl last week, but US Department of Energy officials said early Wednesday those stocks actually declined by 500,000 bbl.

Similarly, API said US gasoline stocks were down by 451,000 bbl; DOE reported an increase of 800,000 bbl. US distillate stocks were said by API to have increased by 451,000 bbl, while DOE put the addition at 800,000 bbl.

Meanwhile, the US Energy Information Administration reported early Thursday that 81 bcf of natural gas was injected into US underground storage facilities last week. That's down slightly from a revised injection figure of 87 bcf the previous week and from 103 bcf during the same period a year ago.

US gas storage now stands at nearly 2.1 bcf, representing year-over-year surpluses of 432 bcf, compared with the same period a year ago, and of 363 bcf over the 5-year average, said Robert Morris, oil and gas exploration and production analyst for Salomon Smith Barney Inc., New York.

In other news, Dynegy Inc. in Houston halted energy trading Thursday on its Dynegydirect online system, "due to poor market conditions." A company spokesman said the firm would continue trading by phone with North American and UK customers.

Dynegy announced Wednesday that Rob Doty resigned as the company's executive vice-president and chief financial officer. Louis Dorey was named as his replacement.

Doty was with Dynegy 10 years in various senior positions in accounting and finance before being named CFO in 2000. He most recently served as president of Energy Marketing and Origination at Dynegy, managing its wholesale power and gas marketing and origination business.

The company also fired about 300 staff employees, mostly in Houston.

The July contract for US benchmark light, sweet crudes lost 12¢ to $25.31/bbl Wednesday on the New York Mercantile Exchange, but later rebounded to $25.50/bbl in after-hours electronic trading. The August contract also dipped, 7¢ to $25.58/bbl during the regular NYMEX session.

Unleaded gasoline for July delivery dropped 0.82¢ to 76.84¢/gal. Heating oil for the same month was down 0.25¢ to 65.24¢/gal. However, the July natural gas contracted inched up 0.2¢ to $3.31/Mcf.

"The (NYMEX gas futures) market battled to fill a technical gap with a mix of fund and trade buying and some short-covering by locals, but eroded toward a nearly flat settlement," Enerfax Daily reported Thursday.

"Liquidity in the market is steadily dropping as trader layoffs at Dynegy, Aquila (Inc., Kansas City, Mo.), El Paso (Corp., Houston), and many other companies take their toll. Traders have seen an erosion of open interest of about 6,000 positions/day over the last week, and 8% over the last few weeks," it said.

In London, the August contract for North Sea Brent oil declined 24¢ to $24.55/bbl, while the September contract was down 22¢ to $24.61/bbl on the International Petroleum Exchange. The July natural gas contract also fell, by 0.5¢, to the equivalent of $1.79/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes retreated 4¢ to $23.85/bbl on Wednesday.

Members of OPEC and non-OPEC oil exporters need to continue their cooperation to stabilize global oil markets, said Alí Rodríguez Araque, outgoing secretary general of the cartel.

In the opening address at the second annual meeting of OPEC and non-OPEC senior industry experts Thursday in Vienna, Rodríguez called for caution among oil producers, because world demand for crude is expected to grow by a modest 400,000 b/d this year.

At that meeting Adnan Shihab-Eldin, OPEC's director of research, expressed concern over the steady rise in non-OPEC oil production, which he put at 1.3 million b/d for this year.

There should be ample room for both OPEC and non-OPEC producers to share the expected increase in world oil demand, said Shihab-Eldin. But he stressed the need for patience and a balanced approach in coordinating capacity growth.

"We must devote more time to discussing these issues in detail," he said.