MARKET WATCHCrude inventory build undercuts prices
Crude prices fell May 9 because of a larger-than-expected jump in US oil inventories, the first increase in 13 weeks.
HOUSTON, May 10 -- Crude prices fell May 9 because of a larger-than-expected jump in US oil inventories, the first increase in 13 weeks.
Despite a "very negative set of statistics," benchmark US crude still managed to settle above the support level of $61.30/bbl, "helped by a late rally in gasoline," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland.
The US Energy Information Administration reported commercial US inventories of crude jumped by 5.6 million bbl to 341.2 million bbl, near the upper end of average, in the week ended May 4. US gasoline stocks increased by 400,000 bbl to 193.5 million bbl in the same period, after falling for 12 straight weeks to the lowest level since the 2005 hurricane season as well as 7% below the 5-year average (OGJ Online, May 9, 2007). An earlier Bloomberg News survey indicated industry expectations of an 875,000/bbl boost to crude stocks for that period and an increase of 150,000 bbl in gasoline inventories.
However, Jakob said, "The build in gasoline stocks was insignificant and continues to test what is the minimum-of-cover for the US gasoline system." With a strong backwardation in gasoline and a wide contango in benchmark US crudes, he said, "US refineries continue to have a better incentive in just-in-time product management rather than converting the crude oil stocks to gasoline stocks."
Analysts in the Houston office of Raymond James & Associates Inc. said, "The sluggish return of refineries from maintenance season, combined with strong gasoline demand, have left gasoline inventories significantly below the 5-year range. Escalating violence in Nigeria, the world's eighth largest oil exporter, is serving to underpin crude and could in fact drive it higher over the near term."
Meanwhile, Andrea, the first named tropical storm of the 2007 hurricane season, was downgraded May 10 to a subtropical depression about 100 miles east-southeast of Jacksonville, Fla.
The June contract for benchmark US sweet, light crudes dropped 71¢ to $61.55/bbl May 9 on the New York Mercantile Exchange. The July contract lost 83¢ to $63.16/bbl. On the US spot market, West Texas Intermediate was down 71¢ to $61.56/bbl. Heating oil for June delivery fell 1.41¢ to $1.82/gal on NYMEX. The June contract for reformulated blend stock for oxygenate blending (RBOB), however, increased 2.64¢ to $2.23/gal.
The June natural gas contract climbed by 8.3¢ to $7.72/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., increased 4.5¢ to $7.51/MMbtu. The EIA reported May 10 the injection of 96 bcf of natural gas into US underground storage in the week ended May 4. That was up from 87 bcf the prior week and 86 bcf during the same period last year. US gas storage now exceeds 1.7 tcf, down by 230 bcf from a year ago, but 297 bcf above the 5-year average. The latest injection likely was affected by the "continued influx of [LNG] imports, partially offset by declining Canadian imports," Raymond James analysts said.
In London, the June IPE contract for North Sea Brent crude lost 34¢ to $65.20/bbl. Gas oil for May was down $2.50 to $570/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes increased by 11¢ to $62.12/bbl on May 9.
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