Sam Fletcher
Senior Writer
HOUSTON, Sept.18 -- Energy futures prices fell Wednesday following government and industry reports of large increases last week in commercial US inventories of oil and petroleum products.
In addition, the US Energy Information Administration reported early Thursday that natural gas injections into US underground storage jumped to 102 bcf last week, up from 97 bcf the previous week and 69 bcf during the same period last year. The latest injection figure was well above most analysts' expectations and therefore is likely to have an adverse impact on gas futures prices.
US natural gas storage now stands at nearly 2.6 tcf, still 336 bcf short of year-ago levels and down by 120 bcf from the 5-year average for this period.
Oil imports, stocks jump
With a jump in US crude imports to 10.8 million b/d—"the highest weekly average ever"—US oil inventories surged by 3.1 million bbl to 279.3 million bbl during the week ended Sept. 12, EIA officials said Wednesday. US oil imports, including some from Iraq, increased last week by more than 1.1 million b/d from the previous week. US imports of crude averaged 10.2 million b/d in the 4 weeks through Sept. 12, up by 944,000 b/d from the same period in 2002. US imports of oil from Saudi Arabia and Venezuela "increased significantly last week," officials said.
US gasoline stocks increased by 2.7 million bbl to 195.3 million bbl last week, while distillate fuel inventories rose by 2.9 million bbl, including 2.2 million bbl of heating oil, to a total of 131.3 million bbl, EIA reported.
The American Petroleum Institute said US oil stocks jumped by 3.8 million bbl to 282.1 million bbl during that same period. It said US distillate inventories increased by 2.4 million bbl to 128.8 million bbl. However, API recorded a drop of 239,000 b/d in US gasoline stocks to 195.6 million bbl.
Traders interpreted those reports as evidence of excess supplies, triggering a sell-off of long market positions that would obligate holders to take delivery of commodities at some future date.
However, EIA officials said, "Total commercial inventories are 73.9 million bbl less than the 5-year average for this time of year." Moreover, they said US "gasoline demand over the last 4 weeks has averaged 9.2 million b/d, or 1.6% above the same period last year." Demand for distillate fuel was down by 4.5% in the same period, while the market for kerosine-type jet fuel declined by 2.2%.
High refinery runs
During the last week of August, US refiners produced the largest quantity of gasoline for a single week in more than 4 years, API officials reported Wednesday. US refiners produced 8.91 million b/d of gasoline during that week, which helped boost total US gasoline production in August by about 0.5% from year-ago levels, they said.
US gasoline production in August averaged 8.71 million b/d, surpassing the August 2002 record despite a mid-month massive electrical blackout that shut down seven refineries in the US and Canada, some for more than a week (OGJ Online, Aug. 15, 2003). The gasoline market also was curtailed by the repair and testing of an 8-in. products pipeline that disrupted gasoline shipments to Phoenix, Ariz., through most of August.
EIA reported crude input into US refineries averaged 15.8 million b/d during the week ended Sept. 12, up by 20,000 b/d from the previous week.
Energy prices
Unleaded gasoline for October delivery plunged by 3.98¢ to 79.48¢/gal Wednesday on the New York Mercantile Exchange. Heating oil for the same month fell by 2.33¢ to 71.15¢/gal. The October contract for benchmark US sweet, light crudes lost 53¢ to $27.03/bbl, while the November position was down by 52¢ to $27.16/bbl.
The October natural gas contract dipped by 1.9¢ to $4.64/Mcf Wednesday on NYMEX, "on expectations [of] a large, bearish weekly storage report and a sinking crude oil market," analysts at Enerfax Daily reported Thursday. "The market opened down and dipped lower early [Wednesday], trading under $4.60[/Mcf] for most of the morning before gaining back most of the early losses in choppy afternoon trading."
However, they said, "Many traders expect only limited downside near-term, because cash prices were still more than 70¢/MMbtu below January futures, which should encourage storage players to buy and hold physical gas. In addition, the upcoming maintenance at many nuclear power plants should translate into more natural gas load in the coming weeks and help offset weak autumn demand."
Meanwhile, profit margins have improved in the ammonia industry as a result of recently lower natural gas prices. As a result, Robert S. Morris, Banc of America Securities LLC, New York, reported Thursday "indications that some of the domestic ammonia production, curtailed earlier this year, has begun to return."
New lows in London market
In London, futures prices for North Sea Brent oil fell to 4-month lows Wednesday on the International Petroleum Exchange in expectation of bearish reports of US inventories of oil and petroleum products. The October Brent contract was down by 32¢ to $25.67/bbl.
Brokers said that market seemed to be seeking justification for aggressive selling, with no clear level of support. Prices could keep dropping to test—and likely break through—support at $25/bbl, they said.
The October natural gas contract gained 4.9¢ to the equivalent of $3.09/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 43¢ to $25.16/bbl Wednesday.
Contact Sam Fletcher at [email protected]