MARKET WATCH: Crude price treads near $50/bbl

Energy prices slipped lower for the third consecutive market session Apr. 15 but remained near $50/bbl as commercial US crude inventories jumped to the highest level since September 1990.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 16 -- Energy prices slipped lower for the third consecutive market session Apr. 15 but remained near $50/bbl as commercial US crude inventories jumped to the highest level since September 1990.

The Energy Information Administration said crude stocks escalated by 5.6 million bbl to 366.7 million bbl in the week ended Apr. 10. Gasoline inventories dropped 900,000 bbl to 216.5 million bbl in that same period, still above average for this time of year. Distillate fuel inventories fell 1.2 million bbl to 139.6 million bbl with storage also higher than average (OGJ Online, Apr. 15, 2009).

The Organization of Petroleum Exporting Countries has curbed its production in recent months. "But the main US market is receiving more crude oil, not less, than last year," said Olivier Jakob at Petromatrix, Zug, Switzerland. "On the 4-week average, crude imports into the US Gulf Coast are 500,000 b/d higher than last year despite the fact that OPEC production is supposed to have been 3.2 million b/d lower than a year ago in the first quarter," he said.

Commercial crude in storage on the US Gulf Coast is 7 million bbl short of a record high. With oil arriving steadily, refiners will need to push barrels up the pipeline to Cushing, Okla., to make room for more imports, Jakob said.

In New Orleans, analysts at Pritchard Capital Partners LLC said, "Heating oil demand has remained fairly high in the US thanks to lingering cold in the Northeast."

On the other hand, US demand for petroleum products remains under pressure, down as much as 2.3 million in the latest week from year ago levels and down 1.8 million b/d on the 4-week average. "Product demand is still too low and crude oil supply too high compared to refinery runs," Jacob said. With demand falling, refinery utilization rates must decline.

Repsol YPF said Apr. 15 it will temporarily shut down its 100,000 b/d refinery in Cartagena, Spain, due to poor demand and margins. Jakob noted, "The US has been relying on Europe as an export pool and will probably need to shut more refinery units to clear the Atlantic Basin product overhang; that will in turn weigh on crude oil."

Pritchard Capital Partners analysts said, "Markets continue to ignore bearish fundamentals and appear to be taking cues from other factors like inflation fears, the weak dollar, or stock market strength."

Oil and gas equities appear to be holding in the global markets. Meanwhile, at the Apr. 10-19 New York International Auto Show, both General Motors and Ford Motor Co. are offering $50 gift cards to entice people to test drive their cars. As a result, Jakob said, "The real bottoming of the economy can still be questioned."

Energy prices
The May contract for benchmark US sweet, light crudes dropped 16¢ to $49.25/bbl Apr. 15 on the New York Mercantile Exchange, with West Texas Intermediate at Cushing duplicating those same amounts on the US spot market. The June contract fell 75¢ to $51.77/bbl on NYMEX. Heating oil for May delivery dipped 0.13¢ but its closing price remained virtually unchanged at an average $1.40/gal. The May contract for reformulated blend stock for oxygenate blending (RBOB) was down 1.08¢ to $1.45/gal.

Natural gas for May inched up 0.4¢ but left the closing price unchanged at an average $3.69/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 2.5¢ to $3.61/MMbtu. EIA reported the injection of 21 bcf of natural gas into US underground storage in the week ended Apr. 10 That lifted the working gas in storage to 1.7 tcf, 438 bcf higher than a year ago at the same time and 311 bcf above the 5-year average.

In London, the May IPE contract for North Sea Brent crude dropped 17¢ to $51.79/bbl. The May gas oil contract lost $4.25 to $447.50/tonne.

The average price for OPEC's basket of 12 reference crudes gained 10¢ to $51.17/bbl on Apr. 15.

Contact Sam Fletcher at samf@ogjonline.com.

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