MARKET WATCH: Crude prices dip moderately
Sam Fletcher
Senior Writer
HOUSTON, Apr. 9 -- Crude prices dipped moderately Apr. 8 on the New York futures market ahead of a new report on US inventories that was expected to show the 12th increase in crude stocks over 13 weeks.
"Investors took a break," said Olivier Jakob at Petromatrix, Zug, Switzerland. "From commodities to equities to the dollar, all the cross markets were at an almost standstill."
The consensus of Wall Street analysts was for an increase of 2.5 million bbl in commercial US crude inventories. But the US Energy Information Administration reported Apr. 9 that crude stocks fell 3.2 million bbl to 316 million bbl in the week ended Apr. 4. Gasoline inventories dropped 3.4 million bbl to 221.3 million bbl during the same period vs. expectations of a 2.3 million bbl draw. Distillate fuel inventories declined by 3.7 million bbl to 106 million bbl, vs. a consensus decrease of 1.3 million bbl. Propane and propylene inventories increased by 400,000 bbl to 25.3 million bbl that same week.
Imports of crude into the US fell 1.4 million b/d to 8.9 million b/d in the same period. The input of crude into US refining, however, increased 142,000 b/d to 14.3 million b/d, with refineries operating at 83% of capacity. Gasoline production increased to 8.9 million b/d. Distillate fuel production rose to 4 million b/d.
Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, said, "Refined product inventories (gasoline plus distillate plus jet fuel) declined by almost 7 million bbl (1.8%) vs. [the prior] week, due primary to lower supply. Demand has shown signs of improvement in recent weeks, and consumption growth is nearing positive territory. Given the recent improvement in refining margins, we expect production to begin to rise in the coming weeks, which could push down refining margins absent an improvement in demand, in our view."
Jakob at Petromatrix said, "The gasoline crack remains under heavy pressure, and heating oil has to do all the job of carrying the refinery margin."
Gas outlook
UBS Securities LLC in New York on Apr. 8 raised its composite spot natural gas price forecasts to $8.35/MMbtu from $7.25 MMbtu for 2008; to $8.60/MMbtu from $7.60/MMbtu for 2009, and to $8.60/MMbtu from $8.25/MMbtu in 2010.
Ronald J. Barone, managing director, cited four reasons for those increases:
-- Expectations that LNG imports will remain well below year-ago levels.
-- Accelerated declines in US imports of Canadian gas.
-- Elimination of the US storage surplus relative to the 5-year average for the first time since December 2005.
-- Strengthening coal prices.
"Storage exited the winter at 1.248 bcf, in line with normal winter-end storage levels. Since December 2005, gas prices have been weighed down due to a storage surplus relative to the 5-year average. The storage overhang was diminished due to favorable weather and a tighter weather-adjusted supply and demand balance due to unusually low LNG and Canadian imports," said Barone. "LNG demand growth in Asia and surging coal prices could set a higher price floor for natural gas."
Energy prices
The May contract for benchmark US crude dropped 59¢ to $108.50/bbl Apr. 8 on the New York Mercantile Exchange. The June contract fell 69¢ to $107.86/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., jumped by $3.47 to $108.50/bbl. Heating oil for May delivery continued to climb, up 2.59¢ to $3.11/gal on NYMEX. The May contract for reformulated blend stock for oxygenate blending (RBOB) lost 3.31¢ to $2.75/gal.
The May natural gas contract dropped 9.4¢ to $9.70/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., gained 24¢ $9.81/MMbtu.
In London, the May IPE contract for North Sea Brent fell 80¢ to $106.34/bbl. The April contract for gas oil dropped $5 to $999/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 benchmark crudes increased 73¢ to $101.89 on Apr. 8.
Contact Sam Fletcher at [email protected].