MARKET WATCH: Oil prices retreat amid drop in consumer confidence

Crude oil prices retreated July 28—only the second time in the past 10 trading sessions—amid a lower-than-expected consumer confidence reading, reported analysts at Pritchard Capital Partners LLC in New Orleans.

Jul 29th, 2009

By OGJ editors
HOUSTON, July 29
-- Crude oil prices retreated July 28—only the second time in the past 10 trading sessions—amid a lower-than-expected consumer confidence reading, reported analysts at Pritchard Capital Partners LLC in New Orleans. The New York-based Conference Board said its Consumer Confidence Index fell to 46.6 in July, down from 49.3 in June (OGJ Online, July 28, 2009).

Also contributing to market weakness on July 28, Pritchard Captial analysts said, were comments by the US Commodity Futures Trading Commission regarding imposing position limits on commodities speculators. They said, “However, CFTC data indicates that speculators have cut long positions in crude by 97% in 2009—implying that the recovery in oil is being driven by fundamentals.”

The US consumer confidence index also played a part in deflating natural gas prices on July 28, Pritchard Capital analysts noted. Also contributing to the downward pressure, however, were concerns about Canadian natural gas storage rapidly approaching full capacity. They said, “Canadian storage is approximately 88% full, especially high for this time of year. If Canadian storage hit full capacity, the logical destination for excess Canadian gas would be the US, and that could mean an additional 1.5 bcfd to the US, which would likely adversely impact natural gas prices.”

US inventories
The US Energy Information Administration said July 29 that commercial inventories of benchmark US crudes increased by 5.1 million bbl to 347.8 million bbl during the week ended July 24. That ran counter to Wall Street’s consensus for a 1.5 million bbl decrease. US crude inventories are above average for this time of year.

Meanwhile, gasoline stocks fell by 2.3 million bbl to 213.1 million bbl in the same period, compared with a consensus for no change. Distillate fuel inventories grew by 2.1 million bbl to 162.6 million bbl. Wall Street analysts expected an increase of 1 million bbl.

Imports of crude into the US were up by 821,000 b/d to 10 million b/d during that week. Input of crude into US refineries was down 171,000 b/d to 14.6 million b/d, with units operating at 84.6% of capacity. Gasoline production fell to 9 million b/d, and distillate fuel production fell to 4 million b/d.

Energy prices
The September contract for benchmark US sweet, light crudes fell $1.15 to $67.23/bbl July 28 on the New York Mercantile Exchange. The October contract fell also, down $1.07 to $68.98/bbl.

On the US spot market, WTI at Cushing, Okla., was down $1.15 to match the front-month crude futures contract’s closing price of $67.23/bbl. Heating oil for August delivery decreased 3.19¢ to $1.76/gal on NYMEX. Reformulated blend stock for oxygenate blending (RBOB) for the same month was down 2¢ to $1.91/gal.

The August natural gas contract dropped 7¢ to $3.535/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined by just half a penny to $3.475/MMbtu.

In London, the September IPE contract for North Sea Brent crude dropped 93¢ to $69.88/bbl. August gas oil lost $10.25 to $564.75/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes was down 56¢ to $68.45/bbl on July 28.

More in Economics & Markets