MARKET WATCH: Resumed European flights lift energy prices

Crude rebounded 2.5% from a 3-week low, ending a three-session losing streak Apr. 20 in the New York market as European airlines resumed their flights following a decline in the ash plume from the erupting Eyjafjallajoekull volcano in Iceland.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Apr. 21 -- Crude rebounded 2.5% from a 3-week low, ending a three-session losing streak Apr. 20 in the New York market as European airlines resumed their flights following a decline in the ash plume from the erupting Eyjafjallajoekull volcano in Iceland.

“[Market] support came from every direction: jet fuel demand finally being brought back on-line, corporate earnings reports coming in strong, and a weakening US dollar,” said analysts in the Houston office of Raymond James & Associates Inc.

The resumption of commercial flights over Europe after almost a week of disruption triggered “a pick-up in jet fuel demand, which has fallen by about two-thirds since the flights in the region were first halted,” said analysts at Pritchard Capital Partners LLC in New Orleans. “The demand for gasoline in the US picked up by 1.8% in the week ended Apr. 16, as per a report by MasterCard Inc.”

The US Highway Administration reported vehicle miles traveled in the US in February were down 2.9% compared with the same month in 2009. “That cannot be a real surprise given the amount of disruptions caused by the snow storms,” said Olivier Jakob at Petromatrix, Zug, Switzerland, “but they are showing a major divergence with the numbers of gasoline demand estimated so far by the Department of Energy through its weekly report (up 0.2% vs. February 2009 in gasoline demand).” That could mean government officials will revise downward their demand estimate in the end-of-the-month update, Jakob said.

Natural gas prices rose 0.8% “on expectation of higher demand by gas-fired power plants as nuclear and coal plants have entered their seasonal maintenance period,” Pritchard Capital Partners reported. “Positive economic outlook has also been providing support to prices on anticipation that industrial demand will continue to improve. However, the market remains oversupplied and the inventory level, which is 16% above the 5-year average at this point, is expected to reach all time highs by the end of traditional fill-season in October.”

US inventories
The Energy Information Administration said Apr. 21 commercial US crude inventories increased 1.9 million bbl to 355.9 million bbl in the week ended Apr. 16. The consensus among Wall Street traders was for an 800,000 bbl decrease. Gasoline stocks jumped by 3.6 million bbl to 224.9 million bbl in the same period, outstripping an expected increase of 500,000 bbl. Distillate fuel inventories were up 2.1 million bbl to 148.9 million bbl, more than twice the expected increase of 1 million bbl.

The American Petroleum Institute earlier reported US crude stocks dropped 741,000 bbl to 354.1 million bbl, while gasoline inventories fell 1.7 million bbl to 220.1 million bbl in that same period. Distillate fuel stocks were down 3.1 million bbl to 146.9 million bbl, API said.

EIA reported imports of crude into the US increased 733,000 b/d to 9.6 million b/d in the latest week. But in the 4 weeks ended Apr. 16, imports were up only 29,000 b/d to 9.3 million b/d over the comparable 4 weeks in 2009.

However, deliveries of crude to US refineries dropped 135,000 b/d to 14.7 million b/d in the latest week with units operating at 85.9% of capacity. Gasoline production increased to 9.4 million b/d. Distillate fuel production increased to 4.1 million b/d, EIA said.

Energy prices
In its last day of trading, the May contract for benchmark US light, sweet crudes rebounded by $2 to $83.45/bbl Apr. 20 on the New York Mercantile Exchange. The June contract advanced 72¢ to $83.85/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., remained in step with the front-month futures contract, up $2 to $83.45/bbl. Heating oil for May delivery increased 2.34¢ to $2.18/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month was up 2.65¢ to $2.28/gal.

The May natural gas contract regained 3.1¢ to $3.98/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., continued to fall, down 9¢ to $3.93/MMbtu.

In London, the June IPE contract for North Sea Brent crude increased 57¢ to $84.80/bbl. Gas oil for May climbed $12.75 to $700.50/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained 94¢ to $81.83/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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