MARKET WATCH: Energy prices continue upward climb

Energy prices continued climbing to record highs May 6 "in a market that has managed to move strongly up on days of negative inputs" such as the strengthening US dollar last week, said Olivier Jakob at Petromatrix.

May 7, 2008

3 min read

Sam Fletcher
Senior Writer

HOUSTON, May 7 -- Energy prices continued climbing to record highs May 6 "in a market that has managed to move strongly up on days of negative inputs" such as the strengthening US dollar last week, said Olivier Jakob at Petromatrix, Zug, Switzerland.

"So it would take a gigantic surprise in [US inventory] statistics to stop the current momentum," Jakob said. The front-month crude contract has increased $9.32/bbl since May 1.

The Energy Information Administration said commercial inventories of benchmark US crudes increased by 5.7 million bbl to 325.6 million bbl in the week ended May 2. Gasoline stocks increased 800,000 bbl to 211.9 million bbl in the same period. Distillate fuel inventories decreased by 100,000 bbl to 105.7 million bbl. Propane and propylene inventories increased by 1.3 million bbl to 29.8 million bbl.

Imports of crude into the US increased by 413,000 b/d to 10.6 million b/d during the same week. Input of crude into US refineries, however, was down 99,000 b/d to 14.7 million b/d with refineries operating at 85% of capacity. Gasoline production decreased to 8.7 million b/d, while distillate fuel production remained unchanged at 4.2 million b/d.

"After declining 36 million bbl (9%) over the past 6 weeks, refined product inventories (gasoline plus distillate plus jet fuel) rose 800,000 bbl last week, the largest gain since Feb. 8," said Jacques H. Rousseau, an analyst at Soleil-Back Bay Research. "Although product inventories have declined to more 'normal' levels over the past few months, there is little doubt that refiners could increase production substantially when margins improve, in our view. We expect weak fundamental conditions to continue in the near term," he said.

Energy prices
Intraday prices for benchmark US light, sweet crudes hit $122.73/bbl May 6, shattering the all-time record of the previous session, before closing at a record $121.84/bbl, up $1.87 for the day on the New York Mercantile Exchange. The July contract also gained $1.87, to $121.34/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.88 to $121.85/bbl. Heating oil for June gained 4.7¢ to $3.35/gal on NYMEX. The June contract for reformulated blend stock for oxygenate blending (RBOB) climbed 5.26¢ to $3.11/gal.

The June natural gas contract dropped 2.8¢ to $11.15/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 2.35¢ to $11.12/MMbtu.

In London, the June IPE contract for North Sea Brent crude increased $2.32 to a record $120.31/bbl closing. Gas oil for May escalated $15 to $1,114.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes rose by $3.15/bbl to $114.75/bbl on May 6.

Contact Sam Fletcher at [email protected].