Weakness of the dollar lifted the June 4 price of the front-month crude futures contract by 0.9% in the New York market, ending a four-session losing streak, while natural gas rose 3.8% on forecasts of warmer weather in June.
In Houston, analysts at Raymond James & Associates Inc. reported, “The broader markets ended the day down marginally as investor concern remained with lower US factory orders, while China’s nonmanufacturing industries expanded at the slowest pace in more than a year.” Both the Oil Service Index and the SIG Oil Exploration & Production Index finished the day down 0.2% amid continued concerns of a global economic slowdown.
However, markets appeared to improve in early trading June 5 following a telephone conference among finance chiefs of the world’s seven wealthiest nations to discuss the deteriorating economic crisis in the European Union. The Associated Press reported Germany’s finance minister continued to oppose reduction of austerity programs by the most financially troubled countries like Greece that are seeking bailouts of sovereign debts.
Olivier Jakob at Petromatrix in Zug, Switzerland, said, “With the UK on [spring bank] holiday yesterday, volume in Brent was half the levels of [June 1] but volume in West Texas Intermediate was healthy, and overall we are not in an ultrathin volume environment. The UK is again on holiday today.”
Jakob said, “With some refinery maintenance in Canada and the unplanned shutdown of one crude unit at BP [PLC's 405,000 b/d Whiting, Ind., refinery], the Canadian discount to WTI is widening again, and that means that we are getting much closer to the ‘value area’ in WTI where being structurally short the flat price of WTI is becoming much less of a no-brainer on fundamental economics due to its greater proximity to the marginal cost of production in Canada. Bottom picking is starting to show-up in WTI as evidenced by the largest inflows into the [United States Oil Fund LP’s exchange traded fund for WTI] since February.”
A 75,000 b d crude distillation unit, the smallest of three at the BP refinery, was shut down June 1 for repair. No restart date has yet been set.
Meanwhile, Jakob said, “We continue to believe Brent still faces a downside risk on its premium to WTI. That premium was eroding yesterday, and for part of the day the reduction of that spread was the main trading action.”
Energy prices
The July contract for benchmark US sweet, light crudes increased 75¢ to $83.98/bbl June 4 on the New York Mercantile Exchange. The August contract advanced 71¢ to $84.27/bbl. On the US spot market, WTI at Cushing, Okla., remained in step with the front-month futures contract, up 75¢ to $83.98/bbl.
Heating oil for July delivery dipped 0.1¢ but closed essentially unchanged at a rounded $2.63/gal on NYMEX. Reformulated stock for oxygenate blending for the same month rose 1.39¢ to $2.67/gal.
The July natural gas contract climbed 8.9¢ to $2.42/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., gained 8.5¢ to $2.32/MMbtu.
In London, the July IPE contract for North Sea Brent was up 42¢ to $98.85/bbl. Gas oil for June continued to fall, however, down $4.75 to $843/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $1.96 to $95.48/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.