MARKET WATCH: Crude drops below $68/bbl in New York

The front-month crude contract dropped below $68/bbl June 26 on the New York market in anticipation of increases in US supplies of crude and petroleum products.

Sam Fletcher
Senior Writer

HOUSTON, June 27 -- The front-month crude contract dropped below $68/bbl June 26 on the New York market in anticipation of increases in US supplies of crude and petroleum products.

The Energy Information Administration reported June 27 that commercial US crude inventories increased by 1.6 million bbl to 350.9 million bbl in the week ended June 22, compared with a 6.9 million bbl jump the prior week. Paul Horsnell at Barclays Capital Inc., London, at that time said the earlier surge resulted from a collapse in the economics for holding crude in floating storage in the US Gulf, resulting in "the highest ever single week's import level" along the Gulf Coast (OGJ Online, June 21, 2007).

Meanwhile, US gasoline stocks dropped 700,000 bbl to 202.6 million bbl in the latest week, well below average range nearing the height of the summer driving season. "A decline in gasoline blending components more than compensated for an increase in finished gasoline inventories," said EIA officials. Distillate fuel inventories fell 2.3 million bbl to 120.4 million bbl. Propane and propylene inventories increased by 2.3 million bbl to 42 million bbl in the same period.

Imports of crude into the US fell 290,000 b/d to 10.5 million b/d last week. Yet the input of crude into US refineries increased by 408,000 b/d to 15.4 million b/d, as refining capacity increased to 89.4%, up from 87.6% the prior week. Nonetheless, US gasoline production was "relatively flat" at 9.3 million b/d while distillate fuel production was "unchanged" at 4 million b/d, EIA reported.

"Due to the historically low refinery utilization rate in the US, crude stockpiles have risen to levels not seen since May 1998," said analysts in the Houston office of Raymond James & Associates Inc. "In Iran, however, gas rationing that took effect at midnight has sparked angry protests and led to two pump stations getting torched in Tehran."

Energy prices
The August contract for benchmark US light, sweet crudes fell $1.41 to $67.77/bbl June 26 on the New York Mercantile Exchange. The September contract dropped $1.52 to $68.25/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.16 to $67.78/bbl. The July contract for reformulated blend stock for oxygenate blending (RBOB) retreated by 5.56¢ to $2.25/gal on NYMEX. Heating oil for the same month lost 4.91¢ to $1.99/gal.

The July natural gas contract declined 6.3¢ to $6.88/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., gained 2.5¢ to $6.86/MMbtu. The July gas contract, which expires at the end of trading June 27, has accumulated losses of 13.1% over the past seven trading sessions in the New York market, said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.

In London, the August IPE contract for North Sea Brent crude dropped $1.19 to $70.17/bbl. Gas oil for July delivery lost $2 to $620/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 15¢ to $67.43/bbl on June 26.

Contact Sam Fletcher at samf@ogjonline.com.

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