MARKET WATCH: Equity, energy commodity prices continue rally

Aug. 8, 2012
Equity and energy commodity prices continued to rally Aug. 7, “driven by the old adage ‘no news is good news’ as there was a distinct lack of market-moving news,” said analysts in the Houston office of Raymond James & Associates Inc.

Equity and energy commodity prices continued to rally Aug. 7, “driven by the old adage ‘no news is good news’ as there was a distinct lack of market-moving news,” said analysts in the Houston office of Raymond James & Associates Inc.

“Crude oil enjoyed another day of gains as hopes of further central bank easing and increasingly positive sentiment around the Euro-zone remained in place,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

He said, “We remain concerned that weaker product demand (especially gasoline) could translate into weaker demand for crude down the line. We don’t feel that our caution is reason to get bearish on crude oil, but we would not get too excited about the potential for US crude inventory draws to push West Texas Intermediate sustainably above $90/bbl.”

Ground noted, “Tropical storm Ernesto, which is headed towards the Bay of Campeche, an area where most of Mexico’s crude oil production comes from, is now apparently weakening. This has added to concerns over possible weaker US demand, bringing some downward pressure to crude oil this morning.”

Crude prices declined in early trading Aug. 8 with traders anticipating another decline in US inventories.

The equity market also retreated after the Bank of England said that country's economy likely will stagnate this year. That’s counter to the bank’s forecast 3 months ago for an annual growth of 0.8%. The French central bank also announced France's economy is expected to contract in the third quarter. Continued concerns about Europe’s economic crisis overshadowed mixed earnings reports.

US inventories

The Energy Information Administration said Aug. 8 commercial US crude inventories fell 3.7 million bbl to 369.9 million bbl in the week ended Aug. 3, exceeding Wall Street’s consensus for a decline of 1.6 million bbl. Gasoline stocks dropped 1.8 million bbl to 206.1 million bbl, exactly as Wall Street projected. Finished gasoline inventories increased while blending components decreased. Distillate fuel inventories were down 700,000 bbl to 123.5 million bbl last week, opposite analysts’ expectations of a 300,000 bbl increase.

The American Petroleum Institute earlier reported commercial US crude stocks fell 5.4 million bbl to 364.3 million bbl last week. It said gasoline inventories increased 417,000 bbl to 207.7 million bbl, while distillate stocks rose 2.4 million bbl to 124.9 million bbl.

EIA said imports of crude into the US increased 221,000 b/d to 8.6 million b/d last week. In the 4 weeks through Aug. 3, crude imports averaged 8.9 million b/d, down 453,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 457,000 b/d, while distillate fuel imports averaged 71,000 b/d.

Crude input into US refineries increased 36,000 b/d to 15.6 million b/d last week with units operating at 92.6% of capacity. Gasoline production increased to just under 9.3 million b/d; distillate fuel production increased to 4.7 million b/d.

Energy prices

The September contract for benchmark US light, sweet crudes rose $1.47 to $93.67/bbl Aug. 7 on the New York Mercantile Exchange. The October contract gained $1.48 to $93.94/bbl. On the US spot market, WTI at Cushing, Okla., was up $1.47 to $93.67/bbl.

Heating oil for September delivery increased 5.71¢ to $3/gal on NYMEX. Reformulated stock for oxygenate blending for the same month advanced 6.91¢ to $2.99/gal.

The September natural gas contract continued climbing, up 5.6¢ to $2.96/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained 8.2¢ to $2.99/MMbtu.

In London, the September IPE contract for North Sea Brent increased $2.45 to $112/bbl. Gas oil for August escalated $16.75 to $947/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up $1.91 to $107.58/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.