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Weekly Oil & Gas Market Highlights: June 13, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures June 13, 2013 June 6, 2013 % Change
Oil – WTI
(USD per barrel)
$96.69 $94.76 2.0%
Oil – Western Canadian Select*
(USD per barrel)
$82.83 $79.01 4.8%
Oil – Brent
(USD per barrel)
$104.25 $103.61 0.6%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$3.81 $3.83 -0.3%

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 rose 2% this week reflecting positive employment and retail sales data from the U.S. However, downward revision of global crude demand growth and weak economic data from China continued to weigh on the market, but largely offset by continued tensions in the Middle East.

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

  1. Last Friday, crude futures rose during European trading, supported by a weaker dollar which was down ~2% against the euro, Japanese yen, and Swiss franc. Futures also rose as traders took positions ahead of the release of a key U.S. jobs report. Later during New York trading, futures rose sharply as the U.S. Bureau of Labor Statistics released its jobs report, which showed the economy added 175,000 jobs last month. The number was above analysts’ expectations of 165,000. WTI crude for July delivery closed up $1.27 at $96.03 per barrel on the NYMEX.
  2. On Monday, crude futures opened high as (North) Sudan announced over the weekend that it would close the two major export pipelines from South Sudan within 60 days unless the latter withdraws support to insurgents operating across the shared border. However, South Sudan denied it was backing any rebels. WTI futures reached a two-week high of $96.25 per barrel. Later during the day, futures fell, breaking the three-day rising trend, after China reported that its industrial output grew 9.2% in May, which was below analysts’ expectations of 9.4%. The country’s Consumer Price Index rose 2.1%, below analysts’ expectations of 2.5%. Futures also fell on news that the Buzzard field in the North Sea had returned to production of 208,000 bbl/d after an equipment failure forced it to halt on June 6. WTI crude futures for July delivery closed down $0.26 at $95.77 per barrel.
  3. Crude futures extended losses as the Bank of Japan left the stimulus program unchanged in its policy statement on Tuesday. Analysts expected some additional measures from the bank to address bond volatility. Crude futures also fell as OPEC revised its global crude demand outlook down to 89.65 MMbbl/d, marginally less than the earlier estimate of 89.66 MMbbl/d. The organization warned that the current value is subject to downward revision due to slowing economic growth globally. On the positive side, U.S. small-business confidence rose to 94.4 in May, the second consecutive rise, according to the National Federation of Independent Business. Crude futures closed for the day at $95.38 per barrel, down $0.39.
  4. On Wednesday, crude futures fell early in the day as the International Energy Agency (IEA) reduced its demand forecast for OPEC crude by 0.2 MMbbl/d to 29.8 MMbbl/d. The estimate is 1.1 MMbbl/d lower than OPEC’s crude production in May. During New York trading, futures rose ahead of the U.S. Energy Information Administration’s (EIA) inventory report on expectations of a 0.7 MMbbl decline in crude stocks. Futures also received support from continued concern over supply disruptions in Libya and Sudan. Futures fell from the day’s high of $96.45 per barrel after the EIA reported that U.S. stockpiles rose 2.5 MMbbl last week. The report showed gasoline stocks increased 2.7 MMbbl to 221.5 MMbbl while distillate stocks fell 1.2 MMbbl to 122.1 MMbbl. However, a weak dollar supported crude prices. The dollar index, which tracks the greenback against a basket of six major currencies (euro, yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc) fell to 80.748, the lowest level since February. WTI crude futures rose $0.50 to close at $95.88 per barrel.
  5. On Thursday, crude futures fell during early Asian trading dragged by the bearish U.S. inventory data. Traders stayed on the sidelines ahead of the Iranian presidential elections on Friday. Iran, holder of the world’s fourth-largest oil reserves, is voting to elect a replacement for the outgoing President Mahmoud Ahmadinejad. During New York trading, the spread between WTI and Western Canadian crude fell below $15 per barrel after Kinder Morgan reported a spill in its Trans Mountain pipeline in British Columbia, which ships oil sands crude to Canadian West Coast. Later in the day, WTI crude futures rebounded sharply after the Commerce Department reported a 0.6% rise in retail sales and the Labor Department reported a drop of 12,000 in jobless claims. The unemployment claims are currently at 334,000, a hopeful sign of economic growth in the U.S. WTI crude futures closed for the day at $96.69 per barrel, up $0.81.

Natural gas prices

U.S. Henry Hub natural gas futures softened 0.3% this week due to concerns about natural gas demand. Futures fell early in the week due to mild weather forecasts, but rebounded in the last two days on revised forecasts showing warmer weather and positive U.S. inventory data.

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

  1. Natural gas futures increased marginally during early trading on Friday, as traders began buying after prices fell 17.4 cents the previous day. However, the early gains were eroded later in the day. The 6-14 day weather forecast showed potential for strong gas demand in Texas and the South-Central region. Baker Hughes reported that the gas-directed rig count was unchanged at 354 for the third week in a row. Henry Hub natural gas futures for July delivery closed up 0.1 cents at $3.828 per MMBtu.
  2. Natural gas futures hovered near a three-month low on Monday, as weather forecasts showed a mixed picture on U.S. gas demand. A 6-10 day forecast from a private forecaster, MDA Weather Services, called for above-normal temperatures across the South and Midwest, and normal temperatures in the Northeast, the major natural gas demand center. Above-normal temperatures will increase the electricity use for air conditioning, which, in turn, will raise natural gas demand in the power sector. However, futures fell as traders pondered over last week’s bigger-than-expected build in inventories and speculated that analysts may be overestimating the demand for the fuel. Natural gas futures closed down 2.8 cents at $3.800 per MMBtu.
  3. On Tuesday, gas futures fell to a fresh three-month low due to mild weather forecasts. Commodity Weather Group, a private forecaster, predicted cooler-than-normal weather in the Midwest, Northeast, and Mid-Atlantic regions while showing hotter-than-normal temperatures in southern U.S. Henry Hub natural gas futures closed down 7.6 cents at $3.724 per MMBtu, the lowest since March.
  4. On Wednesday, after a two-day fall, futures rebounded on support from a warmer-than-average weather forecast. Temperature in southern and central U.S. are expected to be above normal — peak temperature in Dallas during June is expected to be 98 degrees Fahrenheit, 6 units more than average. Natural gas futures moved up 5.3 cents to close at $3.777 per MMBtu.
  5. Natural gas futures rose on Thursday, after the EIA released its weekly inventory report that showed an injection of 95 Bcf, which was in line with analysts’ expectations. The current inventory level of 2,347 Bcf is 2.4% below the five-year average and 20% below the previous year.Natural gas futures closed for the day at $3.814 per MMBtu, up 3.7 cents.

Futures curve

February 2014 WTI futures are 2.2% 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 9.3% 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) 15.24 15.46 -1.46%
Gasoline Demand (MMBPD) 8.65 8.82 -1.97%
Distillate Demand (MMBPD) 4.08 3.75 8.72%
Production (MMBPD) 7.22 7.30 -1.04%
Imports (MMBPD) 7.27 7.27 8.01%
Stocks (million barrels) 393.8 391.3 0.64%
Rotary Rig Count 1,406 1,410 -0.28%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 2,347 2,252 4.22%
Rotary Rig Count 354 354 0.00%
Horizontal Rig Count 1,088 1,089 -0.09%
Consumption (Bcf)* 2,508 (Mar 13) 2,553 (Feb 13) -1.75%
Gross Withdrawals (Bcf)* 2,549 (Mar 13) 2,318 (Feb 13) 9.98%
Canadian Imports (Bcf)* 237.8 (Mar 13) 223.5 (Feb 13) 6.37%
LNG Imports (Bcf)* 8.3 (Mar 13) 11.4 (Feb 13) -27.12%

* 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)

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