MARKET WATCHEnergy prices fall with large input into US oil stocks
By OGJ editors
HOUSTON, June 19 -- Energy futures prices fell Wednesday with reports of a surge in US oil inventories. The US Energy Information Administration said US oil stocks increased by 3.9 million bbl to 288.3 million bbl during the week ended June 13, following a loss of 4.6 million bbl in the week ended June 6.
However, IEA reported US gasoline stocks dropped by 800,000 bbl to 209.1 million bbl for the week through June 13, compared with a gain of 2.6 million bbl during the week ended June 6.
Gasoline is key
"The main eyebrow-raiser is the failure of gasoline inventories to maintain last week's pace of build, or indeed to even build at all," said Paul Horsnell, an analyst with J.P. Morgan Securities Inc., London.
"There would normally only be, at best, 2 more weeks for gasoline inventories to grow before the seasonal decline sets in for the next 2 months. In that context, 209 million bbl looks a bit too low," Horsnell said Wednesday in a weekly report.
He sees the "recent pattern" of tight markets "transferring from crude oil and into oil products. The recent falls in refinery profit margins can only be expected to add further momentum to that trend."
IEA officials reported US inventories of distillates increased by 2.1 million bbl to 109.4 million bbl in the latest week, compared with a hike of 2.8 million bbl during the week ended June 6.
However, total US commercial inventories of oil and petroleum products are 96.6 million bbl below the 5-year average. That deficit "is not being reduced at a pace that suggests that it is likely to disappear in 2003," Horsnell said.
Iraqi 'implosion'
Meanwhile, the 10 active members of the Organization of Petroleum Exporting Countries are being assisted in their defense of their $22-28/bbl price target "at least for the next year" by the "implosion of the Iraqi oil sector," said Horsnell.
"The situation in Iraq would be less serious were it simply that the dynamics of progress towards political stability, internal security, and oil output recovery were all just taking longer than expected," he said. "However, the problem is that dynamics towards any of those objectives do not at this stage even appear to be in place.
"The most recent prognosis from within the Iraqi oil sector is that the current (oil production) target of 1.5 million b/d by mid-July will now most likely be missed. No real progress appears to have been made since the target was 1.5 million b/d by the start of June. If anything, matters still appear to be heading backwards, in some regards," Horsnell said.
Energy prices
The July contract for benchmark US sweet, light oil fell by 71¢ to $30.36/bbl Wednesday on the New York Mercantile Exchange. The August contract dropped by the same amount to $28.77/bbl. Unleaded gasoline for July delivery lost 1.29¢ to 83.73¢/gal. Heating oil for the same month was down 0.71¢ to 74.48¢/gal.
The July natural gas contract fell 13.1¢ to $5.58/Mcf Wednesday on NYMEX in anticipation of another large injection of gas into underground storage.
EIA reported Thursday an injection of 114 bcf into underground storage for the week ended June 13, down from the previous week's record injection of 125 bcf, but up from 81 bcf during the same period a year ago. The latest injection figure was at the lower end of projections by Wall Street analysts.
US gas storage now exceeds 1.4 tcf, down 685 bcf from year-ago levels and 412 bcf below the 5-year average.
In London, the August contract for North Sea Brent oil lost 41¢ to $26.26/bbl on the International Petroleum Exchange. However, the July natural gas contract gained 1.9¢ to the equivalent of $2.92/Mcf on IPE.
OPEC's headquarters in Vienna was closed for a public holiday, so there was no report on the average price Wednesday for OPEC's basket of seven benchmark crudes.