Market watch: Oil futures prices trend down

By the OGJ Online Staff

HOUSTON, Aug. 16 -- Futures prices for oil and refined products fell Wednesday in international markets, wiping out the previous day's gains by many multiples in most cases.

Recently, energy futures markets have followed an alternate pattern, with prices rising one day only to fall again during the next session. But with each ebb and flow, the overall trend has been downward.

Analysts blamed a general "bearish sentiment" and lack of buying interest among traders for Wednesday's fall.

On the New York Mercantile Exchange, the September contract for benchmark US sweet, light crudes tumbled by 45¢ to $27.56/bbl, while the October contract plummeted 53¢ to $26.74/bbl. Both contracts continued to decline in after-hours electronic trading to $27.39/bbl and $26.61/bbl respectively.

Unleaded gasoline for September delivery plunged 2.04¢ to 79.23¢/gal and home heating oil for the same month dropped 0.5¢ to 74.52¢/gal.

However, the September contract for natural gas jumped 37.4¢ to $3.47/Mcf on the NYMEX, after the American Gas Association reported an amazingly low injection of 3 bcf of gas last week into US underground storage facilities. That's well below the previous low of 26 bcf injected during any week in July or August since AGA began reporting weekly injections in 1994, said Robert Morris, energy analyst at Salomon Smith Barney Inc.

AGA officials said they double-checked the data they collected for last week. However, Morris said, "It is possible that the AGA may report a one-time correction in the future to adjust for this ... surprisingly low figure."

The big swing in last week's data was in the major northeastern US gas market, which registered an overall withdrawal of 12 bcf of gas, compared to the injection of 55 bcf the previous week.

"At this point, we do not believe that there is a reasonable explanation to account for the significant week-over-week swing, although a number of factors may have contributed to a small portion of the change," said Morris in his weekly exploration and production report.

For one thing, he said, operators may have elected not to make injections last week as record high temperatures drove up natural gas prices in the Northeast. US temperatures last week were generally 11% higher than a year ago and up nearly 29% from the 10-year average.

As a result, electric power companies may have been running more of their less-efficient generating units to supply peak demand, Morris said. He also noted that Tropical Storm Barry recently shut in some 6-10 bcf of US gas production.

US gas storage now stands at nearly 2.3 tcf, or almost 70% full.

In London, the September contract for North Sea Brent crude fell 44¢ to $25.55/bbl on the International Petroleum Exchange. But natural gas for the same month was up 3.1¢ to the equivalent of $2.42/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes lost 4¢ to $24.97/bbl Wednesday.