MARKET WATCH: Crude, gas prices recover slightly in mixed markets

Energy commodities recovered slightly July 23 with front-month crude up 0.3% in New York, apparently pulled along by improvements in the equity market.

Benchmark crudes in both the US and UK “largely shrugged off the disappointing Hong Kong and Shanghai Banking Corp.’s flash purchasing managers index reading for China (47.7 for July, compared with a previous reading of 48.2),” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. Instead, traders apparently were reassured by Premier Li Keqiang’s claim China’s economic growth will not fall below 7% this year.

“This has many thinking that stimulus might be forthcoming to place this floor under economic activity,” Ground reported. However, he said, “We are not so confident that growth-at-all-costs stimulus will be forthcoming and rather feel that, as with last year’s ‘mini-stimulus,’ any fiscal policy will keep restructuring of the economy as the ultimate goal and consequently will not guarantee a dramatic improvement in economic growth.”

Meanwhile, the Dow Jones Industrial Index climbed 0.1% July 23 to top its former record high of 5 days earlier. Energy stocks bucked both equity markets and crude's modest rise, with the SIG Oil Exploration & Production Index down 0.4% and the Oil Service Index down 0.5%.

US inventories

The Energy Information Administration said July 24 commercial US crude inventories dropped 2.8 million bbl to 364.2 million bbl in the week ended July 19, matching exactly the Wall Street consensus. Gasoline stocks fell 1.4 million bbl to 222.7 million bbl, however, opposite analysts’ expectations of an increase of 1.7 million bbl. Finished gasoline inventories increased while blending components decreased. Distillate fuel declined 1.2 million bbl to 126.5 million bbl last week; a gain of 1.9 million bbl was anticipated.

Imports of crude into the US increased 327,000 b/d to 8 million b/d last week. In the 4 weeks through July 19, US crude imports averaged 7.7 million b/d, down 1.3 million b/d from the comparable period a year ago. Gasoline imports last week averaged 322,000 b/d while distillate fuel imports averaged 168,000 b/d.

The input of crude into US refineries declined 206,000 b/d to 160 million b/d last week with units operating at 92.3% of capacity. Gasoline production increased to 9.2 million b/d last week, but distillate fuel production decreased to 5 million b/d.

Energy prices

The new front-month September contract for benchmark US light, sweet crudes increased 29¢ to $107.23/bbl July 23 on the New York Mercantile Exchange. The October contract gained 28¢ to $105.79/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up 32¢ to match the $107.23 closing of the September crude futures contract.

Heating oil for August delivery recovered 0.29¢ but closed essentially unchanged at a rounded $3.07/gal on NYMEX. Reformulated stock for oxygenate blending for the same month inched up 0.4¢ but also finished virtually unchanged at a rounded $3.06/gal.

The August natural gas contract took back 6.6¢ to $3.74/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained 1.2¢ to $3.71/MMbtu.

In London, the September IPE contract for North Sea Brent continued its rise, up 27¢ to $108.42/bbl. Gas oil for August was up $1.25 to $919.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost 19¢ to $105.95/bbl.

Contact Sam Fletcher at samf@ogjonline.com.