Market watch: Energy futures climb in advance of bullish inventory report

Futures prices for oil and refined products rose Tuesday prior to another unexpectedly upbeat report of diminishing US inventories. US crude stocks fell by 3.4 million bbl last week, and US inventories of unleaded gasoline were down by 1.8 million bbl, the American Petroleum Institute said.

Aug. 8, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Aug. 8 -- Futures prices for oil and refined products rose Tuesday prior to another unexpectedly upbeat report of diminishing US inventories.

After the close of trade on the New York Mercantile Exchange, the American Petroleum Institute said late Tuesday that US crude stocks fell by 3.4 million bbl last week, and US inventories of unleaded gasoline were down 1.8 million bbl.

That could trigger a bidding up of prices in trading today, analysts said.

Earlier Tuesday, the September contract for benchmark US sweet, light crudes gained 20¢ to $27.94/bbl in the regular NYMEX session, while the October contract advanced 22¢ to $27.35/bbl. In after-hours electronic trading, both contracts continued to climb to $28.09/bbl and $27.47/bbl, respectively.

Home heating oil for September delivery also increased 0.87¢ to 73.43¢/gal during Tuesday's regular session, and unleaded gasoline for the same month was up 0.31¢ to 77.85¢/gal. However, the September natural gas contract dropped 5.6¢ to $2.97/Mcf.

Since mid-May, natural gas has not recouped any of the market it lost when prices peaked last year, said Robert Morris of Salomon Smith Barney Inc. in his monthly exploration and production report Tuesday. During that same period, natural gas was injected into US underground storage at a rate of 4-5 bcfd and "is very likely to exceed any prior historic level at the beginning of November," he said.

As a result, Morris said, composite US spot natural gas prices are likely to drop below $2.50/Mcf and might test $2/Mcf "in the worst case scenario" over the next several months,

Meanwhile, he said, "Crude prices are likely to face a tug-of-war between anemic demand growth and OPEC's ability to reduce output to balance global markets. Our view is that OPEC will find it difficult to continue to reduce output to support current oil price levels given the historic effect of high prices on demand."

In London, North Sea Brent crude managed to push through the $26/bbl level on the International Petroleum Exchange. The September contract settled at $26.08/bbl, up 25¢ for the day after trading in the range of $25.80-$26.55/bbl.

However, the September contract for natural gas lost 3.5¢ to the equivalent of $2.45/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes jumped 66¢ Tuesday to $24.99/bbl, just short of the group's $25/bbl target.