Market watch: Bullish US inventories buoy energy futures prices

Energy futures trading on the New York Mercantile Exchange was mixed but generally positive Wednesday in response to various reports of energy supplies.

By OGJ editors

HOUSTON, July 18 -- Energy futures trading on the New York Mercantile Exchange was mixed but generally positive Wednesday in response to various reports of energy supplies.

The US Department of Energy early Wednesday reported declines in US inventories of oil and gasoline during the previous week, but of different amounts than that posted by the American Petroleum Institute late Tuesday.

According to DOE officials, US oil stocks fell by 2 million bbl last week, gasoline was down by 1.5 million bbl, and distillate stocks increased by 2.1 million bbl. API reported oil and gasoline stocks declined by 4 million bbl and 1.3 million bbl, respectively, while distillates increased by 4.3 million bbl (OGJ Online, July 17, 2002).

The August contract for benchmark US sweet, light crudes gained 13¢ to $27.88/bbl Wednesday on NYMEX, while the September position increased by 25¢ to $28.01/bbl. Unleaded gasoline for August delivery advanced by 0.31¢ to 84.84¢/gal, but heating oil for the same month lost 0.11¢ to 70.98¢/gal.

The August natural gas contract dipped by 2.2¢ to $2.84/Mcf on NYMEX. "The market opened higher, couldn't maintain the momentum, and dropped sharply, but spent the afternoon building back," market analysts at Enerfax Daily reported Thursday. They noted, "The market managed to hold above a key support level at $2.76-2.77(/Mcf)."

That could have triggered "some technical buying upward toward $3(/Mcf)," they said, if the US Energy Information Administration had reported Thursday "a build of less than 50 bcf" in US gas storage last week.

However, EIA officials said gas injections into US underground storage totaled 69 bcf, the same amount as the previous week and up from 67 bcf a year ago. US gas storage now exceeds 2.4 tcf, resulting in surpluses of 347 bcf year-over-year and 366 bcf above the 5-year average.

On the positive side, however, EIA reported "no revisions this week," said Robert Morris at Salomon Smith Barney Inc. in New York. The DOE department has been plagued by frequent revisions since it took over weekly gas storage reporting duties in May, replacing a voluntary American Gas Association survey that began in 1994.

EIA is seeking public comment through Aug. 12 on how it can improve its weekly report, which is a benchmark for energy marketers. It's considering a policy change to include revision in the next weekly report if the cumulative change is at least 7 bcf at either a regional or national level. Otherwise, a special report would be issued for verified changes of at least 35 bcf (OGJ Online, July 12, 2002).

Late news Wednesday of more bombings in Israel fueled a last minute rally for North Sea Brent oil futures prices on the International Petroleum Exchange in London that triggered technical buying and erased earlier losses. The new near-month September contract closed at $26.44/bbl, up 14¢ for the day. However, the August natural gas contract plummeted 17¢ to $1.97/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 38¢ to $25.97/bbl Wednesday.

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