MARKET WATCHMay crude temporarily tops $69/bbl

April 12, 2006
The May crude contract briefly pushed past $69/bbl on the New York market Apr. 11 as Iran announced it successfully began enriching uranium.

Sam Fletcher
Senior Writer

HOUSTON, Apr. 12 -- The May crude contract briefly pushed past $69/bbl on the New York market Apr. 11 as Iran announced it successfully began enriching uranium despite US-led opposition from the United Nations.

US Secretary of State Condoleezza Rice called Apr. 12 for "strong steps" from the UN Security Council in response to Iran's defiance of international restrictions on nuclear projects.

Analysts in the Houston office of Raymond James & Associates Inc. said, "The market was not overly shocked by the announcement, as Iran has been working towards this for months."

However, there is "not much out there" to roll crude prices back, they said. "The methyl tertiary butyl ether to ethanol switch in gasoline is keeping crack spreads at refineries high, putting upward pressure on premium quality crude. On the international front, Nigerian production looks to be out for the foreseeable future, while Iran will increasingly draw more international attention. Recent news articles reporting that the US has conducted preliminary studies on precision strikes in Iran aren't going to settle well," Raymond James analysts said.

US inventories
The Energy Information Administration reported Aug. 12 that commercial US crude inventories gained 3.2 million bbl to 346 million bbl during the week ended Apr. 7. However, gasoline stocks dropped by 3.9 million bbl to 207.9 million bbl in the same period while distillate fuel inventories fell by 4.2 million bbl to 117.4 million bbl, with declines in both heating oil and diesel.

US imports of crude were down by 414,000 b/d to 9.5 million b/d during the week. Total gasoline imports averaged 1.1 million b/d. That marked the tenth consecutive week gasoline imports averaged over 1 million b/d and is the largest such streak ever, EIA said.

Input of crude into US refineries dropped by 69,000 b/d to 14.6 million b/d, with refineries operating at 85.6% of capacity. Gasoline production declined to 7.9 million
b/d, but distillate fuel production increased to 3.6 million b/d.

Energy prices
The May contract for benchmark US light, sweet crudes hit an 8-month peak of $69.45/bbl in early trading Apr. 11 on the New York Mercantile Exchange but closed at $68.98/bbl, up 24¢ for the day. The June contract gained 27¢ to $70.38/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 24¢ to $68.99/bbl.

Gasoline rallied on NYMEX, with the May contract up by 4.52¢ to $2.05/gal. Heating oil for the same month gained 1.01¢ to $1.96/gal. The May natural gas contract increased by 2.6¢ to $6.91/MMbtu on short-covering, said analysts at Enerfax Daily.

In London, the May IPE contract for North Sea Brent crude gained 62¢ to $69.37/bbl. Gas oil for April increased by $1 to $592.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes was up by $1 to $63.61/bbl on Apr. 11.

Contact Sam Fletcher at [email protected].