MARKET WATCH: Crude prices rebound before stocks fall

After falling for three sessions, crude futures prices rebounded somewhat Jan. 8 on fears of a pending attack on Nigeria's largest oil and gas export complex and anticipation of another drop in US crude inventories.

Sam Fletcher
Senior Writer

HOUSTON, Jan. 9 -- After falling for three sessions, crude futures prices rebounded somewhat Jan. 8 on fears of a pending attack on Nigeria's largest oil and gas export complex and anticipation of another drop in US crude inventories.

"The most powerful rebel force in Nigeria's oil-rich delta region, the Movement for the Emancipation of the Niger Delta, has reiterated its objective of completely halting Nigeria's exports of 2 million b/d of crude," said analysts in the Houston office of Raymond James & Associates Inc.

Crude stocks fall
Meanwhile, the Energy Information Administration said Jan. 9 commercial US inventories plunged by 6.8 million bbl to 282.8 million bbl during the week ended Jan. 4, well below the Wall Street consensus of a 1.1 million bbl decline. Gasoline stocks jumped by 5.3 million bbl to 213.1 million bbl during the same week, exceeding the consensus of a 1.7 million bbl build. Distillate fuel inventories increased by 1.5 million bbl to 128.7 million bbl, while Wall Street was projecting no change. Propane and propylene stocks decreased by 3.2 million bbl to 51.2 million bbl last week.

Imports of crude into the US declined by 203,000 b/d to 9.8 million b/d during that same week. However, the input of crude into US refineries increased by 389,000 b/d to 15.8 million b/d, with refinery operations increasing to 91.3% of capacity. Gasoline production increased to 9.1 million b/d while distillate fuel production rose to 4.5 million b/d.

"Although today's petroleum inventory data release was definitely negative for the refiners due to rising inventories of refined products, there were a few positive aspects hidden in the data," said Jacques H. Rousseau at Back Bay Research LCC, a research partner for Soleil Securities Corp. "First, demand continued to improve (now 2.6% above year-ago levels over the past 4 weeks) and second, 4 million bbl of the increase to gasoline inventories was to the 'blending components' category, which is more of an arbitrary calculation than 'finished' gasoline, in our view."

However, he said, "We expect the negative data trend to continue through the end of January, and coupled with our view that consensus refiner earnings expectations for the fourth quarter of 2007 are too high, we believe refining margins and stock prices should remain under pressure this month."

Energy prices
The February contract for benchmark US light, sweet crudes escalated by $1.24 to $96.33/bbl Jan. 8 on the New York Mercantile Exchange. The March contract climbed $1.18 to $96.08/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.24 to $96.34/bbl. Heating oil for February delivery gained 4.28¢ to $2.64/gal on NYMEX. The February contract for reformulated blend stock for oxygenate blending recovered 4.41¢ to $2.47/gal.

The February natural gas contract continued to climb, up 8.8¢ to $7.97/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 0.5¢ to $7.58/MMbtu.

In London, the February IPE contract for North Sea Brent crude gained $1.15 to $95.54/bbl. The January gas oil contract escalated by $22.75 to $839.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes slipped by 7¢ to $91.94/bbl on Jan. 8.

Contact Sam Fletcher at samf@ogjonline.com.

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