Market watch: Refined products buoy prices
By the OGJ Online Staff
HOUSTON, Sept. 6 -- Refined petroleum products buoyed prices on international energy futures markets Wednesday as traders correctly anticipated a draw down of US inventories.
Following the close of trade in energy futures on the New York Mercantile Exchange, the American Petroleum Institute reported a 1.9 million bbl drop last week in US distillate stocks, including home heating oil, despite a concurrent increase in refinery production to 94.5% from 92.2% the previous week.
US gasoline inventories also fell by 1.9 million bbl last week, while US crude stocks increased by a relatively meager 499,000 bbl.
Earlier Wednesday, NYMEX trade in gasoline futures rallied in anticipation of the eighth successive weekly decline in gasoline inventories. The October contract for unleaded gasoline jumped 1.99¢ to 78.83¢/gal. With the winter heating season fast approaching, home heating oil for the same month gained 0.6¢ to 76.71¢/gal.
US benchmark sweet, light crudes for October delivery inched up 2¢ to $26.95/bbl on the NYMEX, while the November contract gained 6¢ to $27.13/bbl. However, both contracts slipped back to $26.94/bbl and $27.10/bbl, respectively, in after-hours electronic trading.
The October natural gas contract dropped 6.1¢ to $2.42/Mcf on the NYMEX.
The American Gas Association reported US underground natural gas storage injections totaled 77 bcf last week. That means the adjusted pace of injections was, for the second consecutive week, close to 3 bcfd more than that of a year ago, down from a persistent excess rate of 4-5 bcfd from mid-May through early August, said Robert Morris of Salomon Smith Barney Inc.
"It appears that natural gas has essentially recouped the last remnants of fuel switching from earlier this year," said Morris in his weekly exploration and production report. The industry has only to average injections of 1 bcfd over last year's pace to have 3.2 tcf of gas in storage by Nov. 1, compared with just under 2.75 tcf at the same time last year, he said.
Morris also announced Wednesday that Salomon Smith Barney was lowering its composite spot natural gas price forecasts to $2.65/MMBtu for the third quarter and $2.50/MMbtu in the fourth quarter of this year, down from $3.25/MMbtu previously.
However, the company increased its spot crude price estimate to $27/bbl for the third quarter, up from $25/bbl previously; and to $24/bbl in the fourth quarter, up from $22.50/bbl earlier.
In London, the strength of NYMEX gasoline futures helped hold North Sea Brent crude above $26/bbl on the International Petroleum Exchange. The October Brent contract closed at $26.32/bbl, up 6¢ in a day of subdued trading in the range of $26.06-$26.60/bbl. The October natural gas contract gained 2.2¢ to the equivalent of $3.01/Mcf on the IPE.
The average price for the Organization of Petroleum Exporting Countries dropped 14¢ to $24.59/bbl.