MARKET WATCH: Crude price dips but natural gas little changed in mixed trading

After a two-session rally, front-month crude declined marginally in apparent profit-taking July 16 in mixed trading in the New York futures market while natural gas was little changed from a previous gain on warmer weather forecasts.

As for the broader market, analysts in the Houston office of Raymond James & Associates Inc. reported, “After an 8-day winning streak, the Standard & Poor’s 500 Index finally pulled back (albeit modestly) amid light trading volumes as investors awaited [Federal Reserve System Chairman] Ben Bernanke's semiannual 2-day testimony on monetary policy.”

At a House Financial Services committee hearing July 17, Bernanke said markets seem more stable since investors “are beginning to understand our message” of no “preset course” in the Fed’s proposal to reduce Treasury bond purchases. Stocks plunged when Bernanke said last month the Fed might reduce its $85 billion bond purchases this year. However, markets seemed to recover after he and other Fed officials said any reduction in the economic stimulation program would depend on the economy’s performance.

The Oil Service Index declined 1% July 16, but the SIG Oil Exploration & Production Index was up 0.5%.

US inventories

The Energy Information Administration said July 17 commercial US crude inventories fell 6.9 million bbl to 367 million bbl in the week ended July 12, far below Wall Street’s consensus for a 2 million bbl drop. Yet crude inventories remain above average for this time of year. Gasoline stocks jumped 3.1 million bbl to 224.1 million bbl last week, opposite market expectations of a 1.5 million bbl decline. Both finished gasoline and blending components increased, with total gasoline inventory well above average. Distillate fuel inventories climbed 3.9 million bbl, more than twice the 1.5 million bbl gain analysts expected.

Imports of crude into the US grew by 189,000 b/d to 7.7 million b/d last week. In the 4 weeks through July 12, US imports of crude averaged 7.7 million b/d, down 1.1 million b/d from the comparable period in 2012. Gasoline imports last week averaged 717,000 b/d while distillate fuel imports averaged 130,000 b/d.

The input of crude into US refineries increased 119,000 b/d to 16.2 million b/d last week with units operating at 92.8% of capacity. Gasoline production decreased to 9 million b/d; distillate fuel production increased to 5.1 million b/d.

Energy prices

The August contract for benchmark US light, sweet crudes declined 32¢ to $106/bbl July 16 after gaining in the previous two sessions on the New York Mercantile Exchange. The September contract decreased 23¢ to $105.59/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., also was down 32¢ to $106/bbl.

Heating oil for August delivery however increased 2.08¢ to $3.05/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 3.14¢ to $3.13/gal.

The August natural gas contract inched up 0.3¢ but closed essentially unchanged at a rounded $3.68/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dipped 0.6¢ to $3.67/MMbtu.

In London, the August IPE contract for North Sea Brent gained 31¢ to $109.40/bbl. Gas oil for August advanced $3.75 to $919.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 8¢ to $105.39/bbl.

Contact Sam Fletcher at samf@ogjonline.com.