MARKET WATCH: Oil prices rise on bullish inventory report

Aug. 16, 2012
Crude oil prices continued to escalate with front-month crude up 1% Aug. 15 in the New York futures market on a better-than-expected inventory report, but natural gas dropped 2.8%, surrendering most of its gains from the previous session.

Crude oil prices continued to escalate with front-month crude up 1% Aug. 15 in the New York futures market on a better-than-expected inventory report, but natural gas dropped 2.8%, surrendering most of its gains from the previous session.

In the equity market, it was “a typical lazy summer day amid low volumes and a lack of needle-moving news,” said analysts in the Houston office of Raymond James & Associates Inc. For a third consecutive session trades remained within a narrow range, they said.

The market was mixed in early trading Aug. 16 after the US Department of Commerce announced a 1.1% decline in construction of single-family homes and apartments in July compared with June, although the number of building permits issued was the largest since August 2008.

In other news, the US Department of Labor reported 366,000 new applications for unemployment benefits last week, up 2,000 from the previous week. However, the total number of people receiving unemployment assistance was down 70,000 to 5.68 million. Optimists say that’s a sign layoffs have slowed and hiring has increased with 163,000 new jobs in July, the largest gain since February. But skeptics point out the government does not track the number of people dropped from unemployment rolls after exhausting their allotted benefits or giving up the search for nonexistent jobs.

US inventories

The Energy Information Administration reported the injection of 20 bcf of natural gas into US underground storage in the week ended Aug. 10, less than Wall Street’s consensus for input of 24 bcf. That increased working gas in storage to 3.261 tcf, up 442 bcf from the comparable period in 2011 and 363 bcf above the 5-year average.

EIA earlier reported commercial US inventories of crude fell 3.7 million bbl to 366.2 million bbl last week, far more than the Wall Street consensus for a 1.5 million bbl decline. Gasoline inventories dropped 2.4 million bbl to 203.7 million bbl, more than the 2 million bbl draw analysts expected. Both finished gasoline and blending components were down. Distillate fuel stocks increased 700,000 bbl to 124.2 million bbl last week. The market was projecting a decrease of 300,000 bbl (OGJ Online, Aug. 15, 2012).

Energy prices

The September contract for benchmark US sweet, light crudes climbed 90¢ to $94.33/bbl Aug. 15 on the New York Mercantile Exchange. The October contract gained 88¢ to $94.62/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., stayed in step with the front-month futures contract, up 90¢ to $94.33/bbl.

Heating oil for September delivery increased 5.06¢ to $3.09/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 8.26¢ to $3.08/gal.

The September natural gas contract fell 8.6¢ to $2.75/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 2.3¢ to $2.78/MMbtu.

In London, the September IPE contract for North Sea Brent jumped $2.22 to $116.25/bbl. Gas oil for September advanced $11.50 to $969/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes was up 55¢ to $110.65/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.