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Weekly Oil & Gas Market Highlights: May 30, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures May 30, 2013 May 23, 2012 % Change
Oil – WTI
(USD per barrel)
$93.61 $94.25 -0.7%
Oil – Western Canadian Select*
(USD per barrel)
$74.11 $74.35 -0.3%
Oil – Brent
(USD per barrel)
$102.19 $102.44 -0.2%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$4.02 $4.26 -5.6%

Data sources: Bloomberg; CME Group
* Western Canadian Select is a blend of Canadian heavy conventional and bitumen crude oils blended with sweet synthetic and condensate oils traded in Hardisty, Canada.

Crude oil prices

WTI crude futures closed down 0.7% this week due to rising U.S. supply, moderating global demand and weak economic data from China. Although rising tensions in the Middle East provided some support, weak oil inventory data from the U.S. kept prices in check.

Closing price
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg

  1. Last Friday, crude oil futures fell during Asian trading on profit-taking ahead of the Memorial Day holiday in the U.S. Traders remained concerned that the Federal Reserve may end its bond-buying program. Upside for crude futures came later in the day as U.S. durable goods orders for April rose 3.3%, well above analyst expectations. Futures were also supported by an increase in reformulated gasoline blendstock prices ahead of the summer driving season that was set to begin over the weekend. WTI futures fell 10 cents to close at $94.15 per barrel on the NYMEX.
  2. U.S. markets were closed for the Memorial Day holiday.
  3. During Asian trading on Tuesday, Ali al-Naimi, oil minister for Saudi Arabia, stated that he believed markets are currently well supplied, which indicated to investors that the OPEC meeting on Friday was unlikely to result in a change of production targets. Futures climbed later in the day over concerns about supply constraints as (North) Sudan threatened to close the crude pipeline from South Sudan, protesting the latter’s alleged support for rebel groups inside (North) Sudan. In Syria, concerns surfaced as the European Union lifted its embargo on arms sales to rebels operating in the country. Meanwhile, Nigeria is expected to report below-average oil exports in June as a result of pipeline disruptions. Further, maintenance in Norway’s North Sea fields is expected to reduce crude lifting in the region to just 30% of May volumes. In positive economic news, U.S. consumer confidence rose to a five-year high of 76.2 in May according to the Conference Board. Crude futures rose $1.35 to close at $95.01 per barrel.
  4. On Wednesday, crude futures fell during Asian trading as investors booked profits following Tuesday’s rise. The Organization of the Petroleum Exporting Countries (OPEC) meeting scheduled on Friday at Vienna increasingly seemed likely to be a non-event with Saudi Arabia reiterating its stance that oil markets are well supplied. However, some analysts believe that the organization may need to adjust its production quota of 30 MMbbl/d in light of rising supplies from the U.S. The International Monetary Fund released a report stating that Chinese economic growth would be lower than previously forecast, falling to 7.75% in 2013 from an estimated 8%. The news was bearish for crude demand since China accounts for nearly half the expected increase in global 2013 crude demand. WTI crude futures closed down $1.88 at $93.13 per barrel.
  5. On Thursday, crude futures fell as the Department of Labor released data showing the new unemployment claims rose by 10,000 to a seasonally adjusted 354,000 new claims last week, higher than analyst expectations. U.S. Energy Information Administration (EIA) released its weekly crude stockpile report, which showed a bearish 3 MMbbl build in crude stockpiles to 397.6 MMbbl, the highest crude inventory since 1931. Analysts had expected to see a modest draw on crude stocks. U.S. crude production was up 34,000 bbl/d to 7.29 MMbbl/d, the highest level since the early 1990s. The news sent down the crude futures. However, futures reversed course as the Department of Commerce revised down its first-quarter GDP estimate to 2.4% from 2.5%. The news increased speculation that the Fed would have to maintain its current bond-buying program, which sent the dollar down nearly 1% versus the euro, which is bullish for crude futures. WTI futures rose $0.48 to close for the day at $93.61 per barrel.

Natural gas prices

U.S. Henry Hub natural gas futures fell sharply this week due to forecasts of mild weather and another above-average weekly gas injection. However, prices remained above the $4 mark, supported by natural gas in storage remaining below both the last year’s level and the five-year average.

Closing price
Note: Intra-day prices (every 6 hours); June month futures expired on May 29, 2013.
Data source: Bloomberg

  1. Last Friday, natural gas futures fell slightly as investors booked profits ahead of the Memorial Day weekend. Many businesses were to be closed during the holiday, lowering overall natural gas demand. However, futures found support in the warmer temperatures forecast in the National Weather Service’s (NWS) 6–10 day estimate, which is expected to boost demand. Baker Hughes weekly rig data showed the natural gas directed rig count was unchanged at 354. Natural gas futures closed down 2.4 cents at $4.237 per MMBtu.
  2. On Monday, the trading floor was closed for the Memorial Day holiday in the U.S.
  3. On Tuesday, natural gas futures extended Friday’s losses as NWS’s revised 6–10 and 8–14 day forecasts showed mild weather across much of the country. Due to the moderating temperatures, investors expected an above-average injection in this week’s EIA natural gas data, which also put downward pressure on prices. Henry Hub futures closed down 6.3 cents to close at $4.174 per MMBtu.
  4. Wednesday trading extended losses for a third straight session as traders eyed weather forecasts showing average-to-below-average temperatures in parts of central U.S. Nuclear power plant outages provided little support at 15,700 MW, down from 16,000 MW a year ago. However, outages were up from the five-year average of 14,300 MW. Natural gas futures for June delivery expired down 2.6 cents at $4.148 per MMBtu.
  5. On Thursday, front-month natural gas futures fell for the fourth straight day as the EIA released its weekly natural gas report showing a bearish build in gas inventories. The data showed an 88 Bcf injection over the reporting period, which was in line with analyst expectations, but above the 72 Bcf build during the same period last year. U.S. working natural gas in storage is currently at 2,141 Bcf, which is 24% below last year’s level and 4% below the five-year average. Natural gas futures closed for the day at $4.023 per MMBtu, down 12.5 cents.

Futures curve

February 2014 WTI futures are 1.8% lower than current prices due to growing North American supply and weak demand growth in major economies globally. However, February 2014 natural gas futures are at a premium of 8.2% to near-month (July) futures due to moderating supply growth and increased demand from commercial and residential sectors.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 15.03 15.25 -1.44%
Gasoline Demand (MMBPD) 8.96 8.79 1.93%
Distillate Demand (MMBPD) 3.82 4.22 -9.48%
Production (MMBPD) 7.29 7.26 0.41%
Imports (MMBPD) 7.81 8.13 -3.94%
Stocks (million barrels) 397.6 394.6 0.76%
Rotary Rig Count 1,402 1,408 -0.43%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 2,141 2,053 4.53%
Rotary Rig Count 354 354 0.00%
Horizontal Rig Count 1,087 1,096 -0.82%
Consumption (Bcf)* 2,557 (Feb 13) 2,863 (Jan 13) -10.69%
Gross Withdrawals (Bcf)* 2,320 (Feb 13) 2,542 (Jan 13) -8.73%
Canadian Imports (Bcf)* 228.8 (Feb 13) 262.9 (Jan 13) -12.97%
LNG Imports (Bcf)* 11.4 (Feb 13) 13.5 (Jan 13) -15.56%

Notes:
* 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

Learn more

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Deloitte MarketPoint LLC can help Energy & Resources companies with their most strategic business decisions. Deloitte MarketPoint's analytic suite, called MarketBuilder, is a data analytics solution that helps clients understand future markets and prices for most energy commodities, including oil, gas, refinery products, electricity, emissions, and coal, at each point in the value chain. For more information on how Deloitte MarketPoint can help you make more strategic decisions, please visit www.deloittemarketpoint.com or email deloittemarketpoint@deloitte.com.

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November 19, 2013
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