MARKET WATCH: Oil prices rebound while natural gas continues to rally
Oil prices rebound Feb. 5, taking back some of the losses from the previous session that was described as “worst day of the year” for crude futures on the New York market.
However, “lingering concerns” of capacity on the 500-mile Seaway Pipeline from Cushing, Okla., to the Texas Gulf Coast held the front-month crude contract to a 0.5% gain, said analysts in the Houston office of Raymond James & Associates Inc.
“Natural gas prices increased 3.3%, defying forecasts for super-normal East Coast temperatures next week,” they said.
Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “Oil markets received a kick from better-than-expected services sector activity readings.” The good news started with the Hong Kong and Shanghai Banking Corp. (HSBC) issuing its latest Purchasing Managers Index (PMI) for China, “which grew to 54 in January from 51.7 in the previous month,” Ground said. “Even the data out of Europe showed a marginal improvement, with the Euro-zone services PMI coming out at 48.6, still below the 50 threshold but better than December’s 47.8.”
Ground said, “Even more encouraging was the German services index, which showed particularly strong growth at 55.7 and crucially pushed further into expansionary territory. The US nonmanufacturing sector continued its expansion, coming in slightly better-than-expected (55.2 compared to 55).” A weaker dollar also contributed to solid gains in the oil market.
In the equity market, Raymond James analysts reported, “Needle-moving economic data was in short supply yesterday, but apparently investors were willing to take any excuse to get back into the game after the previous day's selloff.” The SIG Oil Exploration & Production Index followed oil prices higher, increasing 2.1%. However, Raymond James analysts reported, “Oil service stocks though were more resistive,” with the Oil Service Index still in decline, down 0.3%.
US inventories
The US Energy Information Administration said Feb 6 commercial US crude inventories increased 2.6 million bbl to 371.7 million bbl in the week ended Feb. 1, slightly below Wall Street’s consensus for a 2.7 million bbl gain. Gasoline stocks climbed 1.7 million bbl to 234 million bbl in the same period, surpassing analysts’ expectations of a 900,000 bbl increase. Finished gasoline inventories decreased while blending components increased last week. Distillate fuel inventories dropped 1 million bbl to 129.6 million bbl, a steeper decline than the projected 600,000 bbl decrease.
Imports of crude into the US were down 499,000 b/d to 7.6 million b/d last week. In the 4 weeks through Feb. 1 US crude imports averaged 7.8 million b/d, a decrease of 754,000 b/d from the comparable period in 2012. Gasoline imports last week averaged 693,000 b/d, and distillate fuel imports averaged 86,000 b/d.
Input of crude into US refineries declined 50,000 b/d to 14.4 million b/d last week with units operating at 84.2% of capacity. Gasoline production decreased to 8.8 million b/d while distillate fuel production increased to 4.5 million b/d.
Energy prices
The March contract for benchmark US light, sweet crudes took back 47¢ of its $1.60/bbl lost in the previous session to close at $96.64/bbl Feb. 5 on the New York Mercantile Exchange. The April contract regained 45¢ to $97.11/bbl. On the US spot market, West Texas Intermediate at Cushing was up 47¢ to match the front-month futures contract’s finish at $96.64/bbl.
Heating oil for March delivery escalated 3.73¢ to $3.19/gal on NYMEX. Reformulated stock for oxygenate blending for the same month recouped 2.59¢ to $3.04/bbl.
The March natural gas contract continued its rally, jumping 8.4¢ to $3.40/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained most of its previous loss, up 5¢ to $3.34/MMbtu.
In London, the March IPE contract for North Sea Brent rebound 92¢ to $116.52/bbl. Gas oil for February was up $6.50 to $1,010.50/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 31¢ to $112.68/bbl.
Contact Sam Fletcher at [email protected].
About the Author
Sam Fletcher
Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.