Weekly Oil & Gas Market Highlights: December 20, 2012
Deloitte Center for Energy Solutions publication
Key Oil & Gas Price Indicators
|Front Month Futures (August)||December 20, 2012||December 13, 2012||% Change|
|Oil – WTI
(USD per barrel)
|Oil – Brent
(USD per barrel)
|Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
Data sources: Bloomberg; CME Group
Crude Oil Prices
WTI futures rose throughout the week and closed ~5% higher, boosted by positive economic data from China, higher inventory withdrawals, and carry from the expiration of January month futures. However, traders remain cautious as the U.S. government discusses the plans to avert the "fiscal cliff".
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, December 14, crude futures rose during overnight trading as HSBC reported that China’s Purchasing Manager’s Index (PMI) rose from 50.5 in November to 50.9 in December, the highest level in 13 months and the fifth straight month of increases in the benchmark. Although the figure was a “flash” PMI, which is based on 85-90% of the total data for the month, markets responded positively to the news. Chinese stocks posting their largest gains in three years on optimism about growth prospects in the world’s second-largest oil consuming nation. Futures also were supported by continued tensions over Iran’s nuclear program. The International Atomic Energy Agency (IAEA) announced that it was unable to negotiate access to Iran’s Parchin complex for inspections, but said it expects an agreement to be reached sometime in January. Futures began to slide during New York trading over concerns about a political deal in the U.S. to avert the so-called “fiscal cliff”. Several private talks have been held between President Barack Obama and Speaker of the House John Boehner, but the results of the discussions and the status of the deal have not yet been announced publicly. Futures closed at $86.73 per barrel, up 1%.
- On Monday, crude futures were largely range-bound in overnight trading and investors remained cautious while negotiations continued in Washington to come to a resolution on the “fiscal cliff”. Futures showed little reaction to news that Japan’s Liberal Democratic Party won a landslide victory on a platform of monetary easing designed to raise inflation to 2%. Prices began rising as a further expansion of the Seaway pipeline to 850,000 bbl/d was announced on Monday. WTI futures have remained at a discount to Brent as a result of large builds in supply at the Cushing, OK delivery hub where there is a bottleneck in capacity to transport the crude to Gulf Coast refineries. An expansion of the line to 400,000 bbl/d will be completed next month. Later in the day, prices received support as Speaker Boehner announced that he would be willing to increase taxes on millionaires if President Obama would agree to spending cuts. The announcement was viewed as a political breakthrough in Washington circles and boosted investor optimism about economic growth in the U.S.
- Crude futures rose on Tuesday, but remained largely range-bound between ~$88 per barrel and $87 per barrel. Prices rose during the day on optimism that a deal would be reached in the U.S. negotiations over a package of tax increases and budget cuts designed to avert the “fiscal cliff”. President Obama has offered a 10-year budget deal that would increase taxes by $1.2 trillion by hiking tax rates on those making over $400,000 per year while cutting federal spending by $1.22 trillion. Speaker Boehner also announced a “Plan B” budgetary measure that would include tax increases on those making over $1 million a year, should the negotiations fail. There was a refinery fire in Port Arthur, TX on Monday, which caused the operator to halt production at one of its crude distillation units. The unit was put into partial circulation on Tuesday, which revealed signs of a chemical leak. The unit is expected to be offline for the rest of the week. Late Tuesday, the American Petroleum Institute released data showing a 4.1 MMbbl decline in oil stocks for the week ended December 14. Futures ended up 0.8% at $87.93 per barrel.
- On Wednesday, futures rose as the U.S. Energy Information Administration (EIA) released weekly oil stocks data that showed a 964,000 barrel fall in U.S. crude stocks to 371.6 MMbbl. The drawdown in stocks was driven by a >1% increase in refinery runs during the week as refinery utilization rose to 91.5%, the highest level since August. Gasoline stocks rose 2.21 MMbbl to 219.3 MMbbl, while distillates fell more than a million barrels to 117 million. WTI crude futures rose $1.58 to a two-month high on the news before closing at $89.51 per barrel as the January contract expired and the February contract moved to the front-month position.
- In early trading on Thursday, crude futures fell as the Department of Labor released employment data showing an increase of 17,000 in new jobless claims to 361,000 during the prior week. The figure was slightly higher than analyst expectations, raising concerns about the economic recovery. Futures were also weighed down by concerns about the possibility that the U.S. economy might not be able to avert the “fiscal cliff” if a deal was not reached soon. Traders were concerned that a deal to avert the crisis was unraveling as the House of Representatives scheduled a vote on “Plan B”, a tax package that raises taxes only on those making over $1 million per year. However, White House Spokesperson Jay Carney stated that Plan B would not pass in the Senate and was thus futile. Prices began to rise later in the day as the Department of Commerce released new GDP data that showed the U.S. economy grew at an annualized 3.1% in the third quarter, which was above analyst expectations. Futures advanced above the $90 per barrel mark on the news and closed for the week at $90.13 per barrel.
Natural Gas Prices
U.S. Henry Hub futures were volatile early this week due to mixed weather forecasts. However, prices recovered sharply and closed above $3.45 per MMBtu due to a higher-than-expected inventory drawdown of 82 Bcf.
Closing price; December futures expired on November 28.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, natural gas futures closed down 3.3 cents at $3.314 per MMBtu, the seventh consecutive drop over past trading sessions. The price is at a two-month low and down 15% from the recent high of $3.93 per MMBtu reached over a month ago. Futures fell as the National Weather Service’s (NWS) 6–10 day forecast showed nearly half the country experiencing above-average temperatures in the demand centers of the Northeast, North Central, Midwest, and South Central regions. The warmer-than-average temperatures were most acute around Oklahoma and North Texas. Only the South Atlantic and parts of the Mountain region showed below-average temperatures. The 8–10 day forecast showed the areas of above-average temperatures decrease and moderate, but there was little expansion in the areas of below-average temperatures. Traders were also bearish because demand typically falls between Christmas and New Year as many businesses and schools are closed for the week. Data from Baker Hughes released on Friday showed the natural gas rig count fell by one rig to 416, just three rigs above the more-than-a-decade low of 413 reached in the week of November 9 this year.
- Natural gas futures reversed their downward trend on Monday as a new 6–10 day weather forecast from the NWS showed cooler-than-average temperatures along the Pacific Coast and Mountain regions as well as the Mid and South Atlantic. Only the southern parts of Texas and New Mexico showed a significant pocket of above-average temperatures. In the 8–10 day forecast, below-average temperatures expanded to cover all of California and Nevada. However, temperatures returned to average on the East Coast, and most of the rest of the U.S. was forecast to experience average temperatures. Nuclear power plant outages of 12,000 MW (12%) also helped boost prices. The outages were up slightly from 11,300 MW last year, but well above the five-year average of 7,900 MW. Natural gas futures closed up 4.4 cents at $3.358 per MMBtu.
- On Tuesday, natural gas futures rose for a second day as many traders felt that futures had been oversold over the past several trading sessions. Prices were supported by nuclear power plant outages, which remained above the five-year average. Bulls were encouraged by revised forecasts from the NWS, which showed a continuation of the below-average temperatures along the West Coast and Mountain regions, coupled with an expansion into the West North Central and West South Central regions. The 8–10 day forecast showed the pattern not only holding in the regions affected, but also expanding southward to include all of California, Nevada, and Utah. Futures rose 6.0 cents to close at $3.418 per MMBtu.
- Natural gas futures fell sharply during Wednesday trading, down 9.8 cents to close at $3.320 per MMBtu. Private forecasters showed temperatures returning to normal across much of the country in the 11–15 day forecast. Traders also noted that over the past two-day rally, much of the buying had been driven by technical buying. The NWS forecasts showed a continuation of the below-average temperature trend across much of the country. However, above-average temperatures are forecast for the Great Lakes region, New York, and New England. Traders also hedged their positions ahead of Thursday’s EIA natural gas data, which was expected to show a decline in gas stocks, but one that was below last year’s withdrawal and the five-year average.
- On Thursday, natural gas futures rose as the EIA released its weekly natural gas inventory report, which showed a larger-than-expected gas withdrawal of 82 Bcf, while gas in storage fell to 3,724 Bcf. The withdrawal compared bearishly to last year’s withdrawal of 100 Bcf and the five-year average withdrawal of 144 Bcf. The gas in storage figure was nearly 2% above last year’s level of 3,658 Bcf and more than 10% above the five-year average of 3,379 Bcf. Henry Hub natural gas futures closed at 3.462 per MMBtu.
September 2013 futures of WTI is 3.6% higher than current prices, reflecting the average cost of carry, limited upside in demand, and adequate supply. However, August 2013 natural gas futures premium widened to 8.2% due to the recent fall in near-month (January and February) delivery prices.
Data source: Factset
Weekly U.S. Crude Oil and Natural Gas Data
|Indicators||This Period||Prior Period||% Change|
|Refinery Inputs (MMBPD)||15.59||15.37||1.43%|
|Gasoline Demand (MMBPD)||8.62||8.48||1.65%|
|Distillate Demand (MMBPD)||4.21||3.50||20.29%|
|Stocks (million barrels)||371.6||372.6||-0.27%|
|Rotary Rig Count||1,381||1,382||-0.07%|
|Indicators||This Period||Prior Period||% Change|
|Working Storage (Bcf)||3,724||3,806||-2.15%|
|Rotary Rig Count||416||417||-0.24%|
|Horizontal Rig Count||1,105||1,103||0.18%|
|Consumption (Bcf)*||1,790 (Sep 12)||1,982 (Aug 12)||-9.68%|
|Gross Withdrawals (Bcf)*||2,423 (Sep 12)||2,376 (Aug 12)||1.97%|
|Canadian Imports (Bcf)*||240.40 (Sep 12)||262.17 (Aug 12)||-8.31%|
|LNG Imports (Bcf)*||11.50 (Sep 12)||19.10 (Aug 12)||-39.79%|
*The EIA does not provide weekly natural gas consumption, withdrawal, and import numbers. Thus, the latest available monthly numbers are reported above.
Data source: U.S. Energy Information Administration (EIA)
Comments and questions welcomed. Please contact DeloitteCenterforEnergySolutions@deloitte.com
Deloitte's new paper Energy Independence and Security: A Reality Check, discusses the realities of U.S. energy independence and energy security — and whether these are realistic and achievable goals. Understanding how to reach energy independence and security requires us to know more about our sources and uses of energy — and the realities of energy supply and demand.
Deloitte’s report, On The Road Again: Managing Transportation Logistics for Unconventional Drilling, discusses how the surge in shale development significantly increases the transportation and logistics requirements at the well site. This article explores the impact of these requirements on safety, cost and productivity concerns for oil and gas operators and the opportunities for operators to take an active approach to managing transportation and to drive greater value for the company.
Deloitte's report, 2012 Midyear Report, Oil & Gas Mergers and Acquisitions: An uncertain pricing outlook dampens activity, covers deals from the past six months by sector and reveals the insights of Deloitte M&A specialists on what is driving activity and what this says about how the business is changing. The report also discusses a slowing of dry gas activity, while the Gulf of Mexico picks up; continued consolidation, as companies face the challenges of a new energy landscape; weak natural gas prices, a declining U.S. rig count, and lower deal activity; and, activity overseas and interest from atypical buyers.
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.
Save these dates
May 21-22, 2013
Deloitte Energy Conference – Washington, DC
For more information or to obtain a synopsis of the 2011 Deloitte Energy Conference, please contact EnergyConference@deloitte.com
November 19, 2013
Deloitte Oil & Gas Conference – Houston, TX
For more information, please contact OilandGasConference@deloitte.com
About the Deloitte Center for Energy Solutions
The Deloitte Center for Energy Solutions provides a forum for innovation, thought leadership, groundbreaking research, and industry collaboration to help companies solve the most complex energy challenges.
Through the Center, Deloitte’s Energy & Resources Group leads the debate on critical topics on the minds of executives—from the impact of legislative and regulatory policy, to operational efficiency, to sustainable and profitable growth. We provide comprehensive solutions through a global network of specialists and thought leaders.
With locations in Houston and Washington, D.C., the Deloitte Center for Energy Solutions offers interaction through seminars, roundtables and other forms of engagement, where established and growing companies can come together to learn, discuss and debate.
As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.