MARKET WATCHNYMEX energy prices sag as traders await new indicators
Sam Fletcher
Senior Writer
HOUSTON, Oct. 16 -- Energy futures prices declined Wednesday on the New York Mercantile Exchange as traders awaited reports of the latest movements in US inventories of crude, petroleum products, and natural gas.
"Even [with oil futures prices] close to $32/bbl, the market needed to wait for fresh news and fresh data before traders could even start to feel comfortable about contributing to any significant selling pressure," said Paul Horsnell, head of energy research at Barclays Capital Research, a division of Barclays Bank PLC, London.
Because of the Columbus Day holiday Monday in the US, the US Energy Information Administration's weekly report on US oil stocks was delayed by 1 day until early Thursday.
'Rattlesnake' market
"When [energy futures] prices reared up like a rattlesnake at the end of last week, most traders concentrated on avoiding the fangs rather than looking carefully to see which precise variety of rattlesnake it was," Horsnell reported Thursday.
From its lowest point on Oct. 9 to its highest point on Oct. 10, the near-month NYMEX price for benchmark US crudes "covered a range of more than $3/bbl," he said. Although that market retreated some this week, the settlement price for the November benchmark crude contract in each of the last three NYMEX sessions has "fallen within a range of just 20¢[/bbl]" from the Oct. 10 closing of $31.99/bbl, he said.
"If the market is going to react so violently to the first few flakes of seasonal information, it says something for the potential for volatility that lies ahead in coming months," Horsnell said. "Indeed, we are now beginning to think that, as long as certain conditions are maintained, the downside to oil prices might be surprisingly limited over the coming months."
He said, "We suspect that the big picture story is that the oil market is again swinging towards being primarily oil-product led, and to be specific, led by US oil products." Horsnell sees "a return to the pattern that held from the backend of 2000 through to September 2001" when "crude oil inventories and perceptions about global balances had very little impact" on market prices.
During that period, he said, "The lack of headroom in the US downstream was contributing to cycles of heating oil price spikes followed by gasoline price spikes. As these dislocations had become the rule rather than the exception, the prospects for the next spike were dominating trading sentiment well before the spike actually happened."
Oil stocks grow
During the week ended Oct. 10, commercial US inventories of crude increased by 3.8 million bbl to 290 million bbl, which is 6.9 million bbl below the 5-year average for that period, EIA reported early Thursday. US gasoline inventories fell by 3.4 million bbl to 194.6 million bbl last week, down by 8.4 million bbl from the 5-year average. Distillate stocks dropped 1.7 million bbl to 129.8 million bbl, with diesel fuel accounting for most of that loss. US distillate stocks are below the 5-year average by 2.8 million bbl, EIA said.
"This week's data reinforces the pattern of last week, in that the crude market continues to ease while the product market remains tight," Horsnell observed.
"Gasoline demand over the last 4 weeks has averaged nearly 9.1 million b/d, or 3.7% above the same period last year," said EIA officials. "Distillate fuel demand is up 3.5%, while kerosene-type jet fuel demand is down 0.6% over the last 4 weeks, compared [with] the same 4-week period last year."
US imports of crude averaged 10 million b/d last week, up by 167,000 b/d from the previous week. "Crude oil imports have averaged 9.9 million b/d over the last 4 weeks, which is 888,000 b/d more than averaged over the same period last year," said EIA officials. "It appears that crude oil imports from Venezuela and Iraq were at the highest levels seen in several weeks."
Crude input into US refineries averaged 15.1 million b/d in the week ended Oct. 10, up by 120,000 b/d from the previous week. "While this may just be a 1-week increase, it may also indicate that refineries are beginning to return from their fall maintenance," EIA said.
Gas storage increases
EIA also reported Thursday that 81 bcf of natural gas were injected into US underground storage during the week ended Oct. 10, increasing US gas storage to 2.94 tcf. Last week's gas injection was at the low end of consensus among Wall Street analysts, although up from injections of 75 bcf the previous week and 48 bcf during the same period in 2002 when 25 bcf of natural gas production in the Gulf of Mexico were shut in by Hurricane Lili.
Total gas now in US underground storage is 184 bcf less than at this time last year and 8 bcf below the 5-year average, EIA reported.
Energy prices
The November contract for benchmark US sweet, light crudes lost 5¢ to $31.77/bbl Wednesday on NYMEX, while the December position was down by 7¢ to $31.86/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was unchanged at $31.83/bbl.
Unleaded gasoline for November delivery dropped 0.55¢ to 88.41¢/gal on NYMEX. Heating oil for the same month declined by 0.4¢ to 86.88¢/gal. The November natural gas contract lost 4.4¢ to $5.43/Mcf Wednesday on NYMEX.
In London, however, the November contract for North Sea Brent increased by 18¢ to $30.87/bbl Wednesday on the International Petroleum Exchange. The November natural gas contract also gained on IPE, up 3.9¢ to the equivalent of $4.27/Mcf. However, gas oil for the same month lost $3.50 to $264/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes declined by 12¢ to $29.66/bbl Wednesday.
Contact Sam Fletcher at [email protected]