MARKET WATCH: Oil prices rise; OPEC takes no action

Energy prices rebounded Mar. 16, reclaiming most of the losses from the previous session in the New York market, as the US dollar weakened and officials of the Federal Reserve System said they will continue to keep its interest rates near zero for an “extended period.”

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 17 -- Energy prices rebounded Mar. 16, reclaiming most of the losses from the previous session in the New York market, as the US dollar weakened and officials of the Federal Reserve System said they will continue to keep its interest rates near zero for an “extended period.”

Natural gas prices, however, continued falling in the futures market, down 1%. “There are only 3 weeks left in end-of-withdrawal season with a decent possibility that we might see an injection number by the third week of March. The downward move [in gas prices] also looked through the support from better-than-expected retail sales news. Retail sales increased 0.3% as compared [with] expectation of 0.2% drop in February,” said analysts at Pritchard Capital Partners LLC in New Orleans.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, “Natural gas continues to drift lower, and the diverging trends between oil and gas should start to maximize substitution where possible.”

Meanwhile, the biggest news coming out of the Organization of Petroleum Exporting Countries’ Mar. 17 meeting was that it was the first in the group’s new secretariat offices in Vienna. That city has been OPEC’s headquarters more than 30 years. As was widely expected, OPEC ministers again voted not to change their official production target.

Jakob said before the meeting, “Angola is again complaining that it should be free of quota; Nigeria is again complaining that it should have a higher quota. Nothing will be changed for them, but OPEC compliance at current world market prices will continue to trend lower, and the date for the next meeting is likely to be set sufficiently far in 2010 to allow most OPEC members to produce at zero compliance and bring Saudi Arabia back to its favored role of being the sole swing supplier to the world.”

OPEC ministers scheduled their next meeting for Oct. 14 in Vienna.

US inventories
The Energy Information Administration said Mar. 17 commercial US crude inventories increased 1 million bbl to 344 million bbl in the week ended Mar. 12. The Wall Street consensus was for a 1.1 million bbl increase. Gasoline stocks dropped 1.7 million bbl to 227.3 million bbl, exceeding traders’ expectations for a 1 million bbl decline. Distillate fuel inventories were down 1.5 million bbl to 148.1 million bbl vs. a consensus for a 1.3 million bbl fall.

Imports of crude into the US decreased by 64,000 b/d to 8.4 million b/d in the same week. In the 4 weeks ended Mar. 12, US imports of crude averaged 8.8 million b/d, down 401,000 b/d from the comparable period last year.

The input of crude into US refineries dipped by 15,000 b/d to 13.9 million b/d last week, with units operating at 80.6% of capacity. Gasoline production increased to 9 million b/d while distillate fuel production increased to 3.8 million b/d.

The American Petroleum Institute earlier reported US crude inventories grew by 403,000 bbl to 344 million bbl while gasoline stocks fell 3.7 million bbl to 226.1 million bbl. It said distillate inventories were down 756,000 bbl to 151.1 million bbl. It reported US refineries operating at 81.3% of capacity.

Jakob noted, “Oil imports reported by the API were 1.2 million b/d lower than [the previous] week, and this was to be expected with the fog disruptions in the US gulf last week. Crude stocks still increased by 2.6 million bbl in the US gulf.”

He reported, “Gasoline sales in France were down 1.7% vs. last year in February while diesel sales were up 5.3% (in January gasoline sales were down 15.3% and diesel down 5.4%). While sales in Germany during February were negatively impacted by the snow storms, sales in France were probably positively impacted by a run on the gas stations due to the fear of an extension of the strikes at the Total SA refineries during that period.”

Energy prices
The April contract for benchmark US light, sweet crudes gained $1.90 to $81.70/bbl Mar. 16 on the New York Mercantile Exchange. The May contract advanced $1.89 to $81.97/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.90 to $81.70/bbl. Heating oil for April delivery escalated by 5.67¢ to $2.11/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 5.22¢ to $2.28/gal.

The April natural gas contract continued to fall, down 4.4¢ to $4.35/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., regained 4.5¢ to $4.36/MMbtu.

In London, the April IPE contract for North Sea Brent crude increased $1.13 to $79.02/bbl. Gas oil for April jumped by $23 to $672.25/tonne.

The average price for OPEC’s basket of 12 reference crudes increased 38¢ to $76.62/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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