MARKET WATCH: Chinese economy, strong dollar lower energy prices

Energy prices fell again Jan. 20 with crude wiping out the 1-day rebound from the previous session amid fears China will move to cool its hot economy after its annual gross domestic product grew 10.7% in the fourth quarter—the fastest climb in 2 years—from a revised 9.1% in the third.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Jan. 21 -- Energy prices fell again Jan. 20 with crude wiping out the 1-day rebound from the previous session amid fears China will move to cool its hot economy after its annual gross domestic product grew 10.7% in the fourth quarter—the fastest climb in 2 years—from a revised 9.1% in the third.

The US dollar also strengthened, pushing to a 5-month high against the euro and undermining crude prices in the process.

“The energy space couldn't escape the weakness throughout the broader markets yesterday as China's moves to pull back on the reins a bit has some questioning the strength left within this nearly year-long rally,” said analysts in the Houston office of Raymond James & Associates Inc. “Crude prices dropped 2% yesterday, with the February contract closing below $78/bbl—not bad given last year's close of about $38/bbl. A strengthening dollar was also partly to blame for the weakness.”

US inventories
The Energy Information Administration said Jan. 21 commercial US crude inventories decreased by 400,000 bbl to 330.6 million bbl in the week ended Jan. 15, counter to Wall Street’s consensus for a 2.4 million bbl increase. US gasoline stocks gained 3.9 million bbl to 227.4 million bbl, exceeding Wall Street’s expectations of a 2 million bbl gain. Distillate fuel inventories fell 3.3 million bbl to 157.1 million bbl, still above average for this time of year. Analysts had anticipated virtually no change in distillate stocks.

Imports of crude into the US were down 355,000 b/d to 8.5 million b/d during that week. Over the 4 weeks through Jan. 15, US crude imports averaged 8.5 million b/d, down 1.2 million b/d from the comparable period in 2009.

Input of crude into US refineries declined 181,000 b/d to 13.8 million b/d in the latest week with units operating at 78.4% of capacity. Gasoline production increased to 8.6 million b/d; distillate fuel production decreased to 3.5 million b/d.

EIA also reported the withdrawal of 245 bcf of natural gas from US underground storage in the week ended Jan. 15. That left 2.6 tcf of working gas in storage. That’s 22 bcf more than in the same period a year ago but 6 bcf below the 5-year average.

Energy prices
The February contract for benchmark US sweet, light crudes dropped $1.40 to $77.62/bbl Jan. 20 on the New York market. The March contract fell $1.58 to $77.74/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $1.40 to $77.62/bbl. Heating oil for February delivery lost 1.26¢ to $2.02/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month declined 1.26¢ to $2.05/gal.

The February natural gas contract dropped 6.1¢ to $5.50/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., was unchanged at $5.52/MMbtu.

In London, the March IPE contract for North Sea Brent lost $1.31 to $76.32/bbl. Gas oil for February dropped $1.25 to $614.25/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes declined 23¢ to $75.30/bbl on Jan. 20.

Contact Sam Fletcher at samf@ogjonline.com.

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