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Weekly Oil & Gas Market Highlights: April 5, 2012

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators for the prior seven days

Crude oil, USD per bbl Noon (EDT) on Thursday, 4/5/12 Noon (EDT) on Thursday, 3/29/12
Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures $102.81 (May-2012 Contract) $103.49 (May-2012 Contract)
WTI Cushing Spot $102.64 $103.34
Dated Brent Spot $122.51 $123.87
Natural gas, USD per MMBtu Noon (EDT) on Thursday, 4/5/12 Noon (EDT) on Thursday, 3/29/12
Front-Month NYMEX Henry Hub Futures $2.11 (May-2012 Contract) $2.17 (May-2012 Contract)
Henry Hub Spot $2.06 $2.03

Data sources: Bloomberg; CME Group

Oil & Gas highlights

  • NYMEX WTI crude futures for May ended down for the week as bearish demand fundamentals weighed heavily on the price and geopolitical tensions stayed quiet during most of the week.
  • On Friday the Brent/WTI spread widened to over $20 in Asian trading after last Thursday’s sell-off.  The potential for a coordinated strategic oil stock release will continue to weigh heavily on futures prices.  However, prices rose as traders began closing short positions following the price decline Thursday.  At the close of the market on Friday, oil was up ending the first quarter of the year higher with a net gain of 4.2% at $103.02 per barrel.  Brent closed at $122.99 a barrel.
  • Secretary of State Hilary Clinton stated over the weekend that a meeting was being arranged in Istanbul for talks with Iranian negotiators about Iran’s nuclear program, which may indicate an easing of tensions over the short-term.
  • Crude futures edged higher in Asian trading Monday buoyed by the broader market.  However, overall trading volumes were light as the market awaits a dominant trend to emerge.  There was some news that the Kurdish region of Iraq had stopped crude deliveries over a payment dispute with the central government in Bagdad.  The amount at issue is less than 100,000 barrels per day (bpd) of oil deliveries.  Futures prices moved up on positive manufacturing data from the U.S.  The Institute for Supply Management reported that the March purchasing manager’s index rose to 53.4 last month from 52.4 in February.  The WTI futures price briefly crossed the $105 per barrel mark.
  • On Tuesday, futures prices declined on profit taking after a 2% increase in oil prices on Monday.  On the global supply side, fighting has broken out on the Sudan – South Sudan border raising doubts that a settlement of the pricing dispute that has shut-in some 350,000 bpd of production is on the horizon.   Oil futures tumbled in the afternoon following the release of the minutes from a meeting of the Federal Reserve, which indicated that there was little support for further quantitative easing.  The U.S. dollar rose rapidly on the news, which sent crude prices lower.
  • Wednesday trading volumes continued their recent slump as many traders remain on the sidelines awaiting the next market indicators.  Oil futures prices fell as the American Petroleum Institute published data showing that oil stocks rose 7.8 million barrels last week and that gasoline stocks fell by 4.5 million barrels.  Further compounding the bearish news, the U.S. Energy Information Agency’s (EIA) weekly oil stocks report showed a 9 million barrel increase in crude stocks, which is the largest increase in three years.  U.S. crude production surpassed 6 million barrels a day, which is ~7.5% higher than last year, while demand for petroleum products is down.  Gasoline demand rose 0.8% during the previous week.  Bearish fundamentals may form the near-term narrative of the market barring major geopolitical developments or supply disruptions.
  • On Thursday futures prices dropped after Mariano Rajoy, the Prime Minister of Spain, announced that the country is likely to need additional international financial support in order to avoid a default.  However, WTI futures prices began to climb as the U.S. Department of Labor announced that new jobless claims fell by 6,000 to 357,000 last week.
    • EIA reported NYMEX crude futures were down $3.85 last week to $103.02 as crude stocks soared by 9.0 MMbbl to 362.4 million.  However, stocks are 4.7 million barrels higher than a year ago.
    • The average retail gasoline price was up $0.023 last week to $3.941 a gallon.  Prices were up $0.25 over last year.  Gasoline stocks fell 1.5 MMbbl to 221.9 million barrels, which is up 5.2 MMbbl from the same time last year.
    • The average retail diesel price was up by $0.005 remaining at $4.14 a gallon.
    • Distillate stocks were unchanged at 135.9 million barrels.

Natural Gas highlights

  • EIA reported Henry Hub spot prices rose last week by $0.02 to $2.06 per MMBtu.  However, on Tuesday and Wednesday of the week, prices were as low as $1.89 per MMBtu. Temperatures averaged 55.1 degrees, 7.7 degrees warmer than the 30-year average and 13.9 degrees warmer than a year ago.
  • Domestic Natural Gas production fell 0.8% last week and is up 4% year on year.  U.S. gas imports from Canada were up 10.6%.  The natural gas rotary rig count rose by 6 rigs to 658, the first rise in 11 weeks.  Oil-directed rigs were up by 5 to 1,318.
  • Working natural gas in storage was up 42 Bcf to 2,479 Bcf, which is 845 Bcf higher than last year.
  • Domestic natural gas consumption rose 3.7% percent from the previous week with the residential/commercial sector rising the most (5.8%) followed by the industrial sector (3.8%) and the power sector (1.4%).

Comments and questions welcomed. Please contact DeloitteCenterforEnergySolutions@deloitte.com

Learn more

Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions have developed an assessment of the potential economic impact of LNG exports from the United States based upon various assumptions. Made in America: The Economic Impact of LNG Exports from the United States summarizes the findings of alternative scenarios regarding U.S. LNG exports and offers related strategic insights.

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