MARKET WATCHExpiring NYMEX crude contract hits new high before fall

The expiring August contract for benchmark US light, sweet crudes hit a near-month high of $42.30/bbl in early trading Tuesday on the New York Mercantile Exchange before closing at $40.86/bbl, down by 78¢ for the day.

July 21, 2004

3 min read

By OGJ editors

HOUSTON, July -- The expiring August contract for benchmark US light, sweet crudes hit a near-month high of $42.30/bbl in early trading Tuesday on the New York Mercantile Exchange before closing at $40.86/bbl, down by 78¢ for the day.

The early price run-up was primarily the result of purchases by refiners needing deliveries of crude. But that was followed by a major profit-taking spree among speculators that pushed crude futures back down, analysts said.

The September contract lost $1 to $40.44/bbl on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down by 78¢ to $40.86/bbl from a corrected price of $41.64/bbl Monday.

Gasoline for August delivery plunged by 4.55¢ to $1.2462/gal on NYMEX, with a spreading belief among traders that long-feared supply shortages may not occur this summer after all. Heating oil for the same month dropped 2.84¢ to $1.0873/gal, while the August natural gas contract gained 1.9¢ to $5.84/Mcf, "managing to rise modestly after losing early gains as crude futures suffered a late tumble on expiration," said analysts Wednesday at Enerfax Daily.

"[Futures] prices were initially boosted by stronger physical (natural gas spot market) prices," the analysts said. "Without a clear change in fundamentals such as a shift in the weather or a storage surprise, prices are likely to stay range-bound between $5.80-6.02[/Mcf]."

In London, the September contract for North Sea Brent crude dropped by 89¢ to $37.01/bbl Tuesday on the International Petroleum Exchange. Gas oil for August delivery dipped by $1.75 to $350/tonne, while the August natural gas contract was unchanged at the equivalent of $4.03/Mcf.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes was down 40¢ to $36.49/bbl Tuesday.

Crude stocks fall
Early Wednesday, the US Energy Information Administration reported commercial US crude inventories plunged by 3.6 million bbl to 299.3 million bbl during the week ended July 16. However, gasoline stocks jumped by 2.5 million bbl, mostly in finished gasoline, to 208.4 million bbl during the same period, while distillate fuel stocks increased by 1.7 million bbl, mostly in heating oil, to 118.4 million bbl.

"Gasoline inventories are now 0.3% above last year and near the 10-year average," said Robert S. Morris, Banc of America Securities LLC, New York, in a report issued Wednesday. "Interestingly, US gasoline demand was down 0.1% year-over-year for the past 4 weeks with total US product demand up only 1.2%"

US crude imports averaged 9.9 million b/d in the week ended July 16, down by 153,000 b/d from the previous week. "It appears that Saudi Arabia was the top source last week for the second week in a row, while crude oil imports from Nigeria were substantially lower," EIA reported.

Crude inputs into US refineries averaged more than 15.7 million b/d during last week, down 86,000 b/d from the previous week, with refineries operating at 94.5% of capacity. Gasoline production increased slightly in that period, averaging nearly 8.9 million b/d.