By OGJ editors
HOUSTON, June 12 -- Energy futures prices continued to decline Tuesday, prior to a surprise report of draw downs of US oil and gasoline inventories that one analyst said could "modestly" rejuvenate the petroleum commodities market.
The July contact for benchmark US sweet, light crudes dropped 17¢ to $24.12/bbl, the lowest level in 2 months for a near-month contract on the New York Mercantile Exchange. The August contract was down 13¢ to $24.43/bbl, as traders—already disheartened by perceptions of low demand and rising US inventories—reacted to persistent reports that some members of the Organization of Petroleum Exporting Countries may be exceeding their production quotas.
However, both contracts rebounded in after-hours electronic trading to $24.25/bbl and $24.55/bbl, respectively, after the American Petroleum Institute reported late Tuesday an unexpected fall of 2.6 million bbl in US crude inventories to 321.6 million bbl last week, instead of an expected increase of 1.5-2.5 million bbl.
US gasoline stocks also declined by 977,000 bbl to 216.7 million bbl during the same period, API said, but total distillate fuel inventories increased more than 1 million bbl to 128.2 million bbl.
That report "is likely to modestly offset the recent bearish market sentiment," said Matthew Warburton of UBS Warburg LLC, New York, in a report issued early Wednesday. "In total, US crude and product inventories fell 3.3 million bbl [week-to-week] to 742.5 million bbl, remaining comfortably in the upper end of the 5-year range," Warburton said. He noted that the draw down of US crude stocks was sparked in part by "a substantial 1 million b/d decrease in crude imports."
Warburton said, "Refining margins remain well below year-ago levels, albeit they have improved materially in recent weeks, helped by falling crude prices, resilient demand for gasoline (9.1 million b/d), and the strongest weekly demand for jet fuel in nearly 8 months." US stocks of jet kerosene dropped by 1.1 million bbl to 40.5 million bbl last week.
"Consequently, average refinery utilization rose for a third consecutive week to 93.8% of capacity, its highest point since the week of Sept. 7, 2001," said Warburton.
That will likely limit any additional improvement in refining margins and crude prices until overall demand for oil products strengthens and inventories are reduced, he said.
Unleaded gasoline for July delivery fell 0.62¢ to 73.63¢/gal during regular trading Tuesday on NYMEX. Heating oil for the same month slipped by 0.5¢ to 62.77¢/gal. The July natural gas contract also dipped 0.3¢ to $3.13/Mcf.
In London, the July contract for North Sea Brent broke support at $23.50/bbl, losing 36¢ to close at $23.30/bbl on the International Petroleum Exchange, as brokers sold in mistaken anticipation of another bearish API report of US inventories. However, the July natural gas contract inched up 0.9¢ to the equivalent of $1.78/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes lost 19¢ to $22.46/bbl Tuesday.