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Weekly Oil & Gas Market Highlights: October 24, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures October 24,
October 17,
% Change
Oil – WTI
(USD per barrel)
$97.11 $100.67 -3.5%
Oil – Western Canadian Select*
(USD per barrel)
$64.36 $69.37 -7.2%
Oil – Brent
(USD per barrel)
$106.99 $110.86 -3.5%
Natural Gas – U.S. Henry Hub
(USD per MMBtu)
$3.63 $3.76 -3.4%

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 fell throughout the week due to bearish builds in U.S. crude inventory data. Although China posted strong growth in its third-quarter GDP, concerns over rising U.S. crude supplies outweighed the positive economic news.

Closing price
Note: Intra-day prices (every 6 hours); November month futures expired on October 22, 2013;
Data source: Bloomberg

  1. Last Friday, crude futures rose during Asian trading as China announced its economy grew 7.8% year on year in the third quarter. On a quarter-to-quarter basis, China’s GDP grew by 2.2%, putting the country on track for over 9% growth in 2013. Crude futures gained support during New York trading as investors speculated that the Federal Reserve will delay a reduction of its $85 billion per month bond-buying program. Janet Yellen, who is expected to take over as the Fed chairman in January, is considered to be more supportive of the bank’s monetary easing policies than current Chairman Ben Bernanke. The Energy Information Administration (EIA) indicated it would begin releasing the oil and gas reports that it was unable to publish during the partial shutdown of the federal government. WTI crude futures for November delivery closed up $0.14 at $100.81 per barrel.
  2. On Monday, crude futures fell as The Joint Oil Data Initiative (JODI) reported that Saudi Arabia produced more crude (10.2 MMbbl/d) than Russia (10.1 MMbbl/d) in August and exported 7.8 MMbbl/d of its production to the world market. Saudi Arabia's crude oil and condensate exports were up 4.4% in August over July. In Nigeria, leaders of the Movement for the Emancipation of the Niger Delta (MEND) announced plans to increase disruptions of oil production in the country. MEND's acts of violence and crude oil disruptions over 2006-09 are estimated to have reduced the country's crude production by 28%. However, futures continued to fall as the EIA released its crude oil stocks data for the week ended October 11, which had been delayed due to the federal government shutdown. The data showed a bearish 4 MMbbl build in crude inventories to 374.5 MMbbl. WTI crude futures closed down $1.59 at $99.22 per barrel.
  3. On Tuesday, crude futures rose 0.6% early in the day after a U.S. Department of Labor report showed an addition of 148,000 jobs to the economy in September. However, futures fell later in the day to a three-month low—below $98 per barrel—on speculation about another bearish crude inventory report from the EIA. The agency is publishing a second inventory report this week to cover for the absence of reports during the government shutdown earlier this month. The decline in WTI prices helped push the Brent premium to WTI over $11 per barrel during the day. WTI crude futures for November delivery closed down $1.42 and expired at $97.80 per barrel. The December contract, which moved into the front-month position, fell $1.38 to settle at $98.30 per barrel.
  4. On Wednesday, China’s Oil, Gas & Petrochemicals newsletter data showed that the country’s crude stockpiles rose by nearly 1.5% in September over August levels. China’s crude supplies rose to around 238 MMbbl, according to the newsletter. In Iraq, OPEC’s second-largest oil producer, the oil ministry stated the county’s production will rise to 3.5 MMbbl/d by the end of December this year. The country continues to increase production in order to capitalize on rising demand from Asia. Crude futures tumbled 2% later in the day as the EIA released data showing crude stocks rose 5.25 MMbbl last week, which was above analyst expectations. Crude stocks in the U.S. currently stand at 379.8 MMbbl. WTI crude futures for December delivery fell $1.44 to close at $96.86 per barrel on the NYMEX.
  5. On Thursday, crude futures rose as HSBC reported China’s Purchasing Manager’s Index rose to 50.9 in October from 50.2 in September. The increase in manufacturing activity in China, the world’s second-largest oil consumer, is viewed as bullish for crude demand. Crude futures found additional support in the continuing uncertainty over the future of the Grangemouth refinery in Scotland. Talks are underway with interested buyers in order to prevent closure of the facility and nearby petrochemical plant. However, concerns over rising crude supplies from the U.S. limited the rise in prices. WTI crude futures for December month delivery closed at $97.11 per barrel, up $0.25.

Natural gas prices

U.S. Henry Hub natural gas futures fell over 3% this week due to a higher-than-expected injection in the gas storage. Traders remained concerned over the rise in natural gas inventories despite forecasts of colder weather in the eastern half of the U.S.

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

  1. Last Friday, natural gas futures rose following an early sell-off driven by short covering. Futures reversed the earlier loss as revised weather forecasts from the National Weather Service (NWS) showed colder weather descending across the eastern half of the U.S. in the 6–10 day forecast. Baker Hughes reported the gas-directed rig count rose by 3 rigs to 372. Henry Hub natural gas futures closed up 0.7 cents at $3.764 per MMBtu.
  2. On Monday, natural gas futures fell as traders expected EIA’s weekly natural gas inventory report, for the week ended October 11, to show a bearish build in natural gas inventories. The report was delayed until Tuesday of this week due to the partial shutdown of the federal government. Expectations of an above-average natural gas injection outweighed the impact of colder weather forecasts from the NWS. The National Hurricane Center (NHC) announced Tropical Depression 13 had formed in the central Atlantic Ocean, but models did not yet show any indication of the storm affecting the Gulf of Mexico. Nuclear power plant outages provided some support for natural gas demand as the Nuclear Regulatory Commission reported 17,100 MW of power offline for maintenance. Henry Hub natural gas futures closed down 9.6 cents at $3.668 per MMBtu.
  3. On Tuesday, natural gas futures fell for a second day on continued concerns over the rise in natural gas inventories. EIA’s inventory data for the week ended October 11 showed a 77 Bcf increase in working gas in storage to 3,654 Bcf. Although the build-up was slightly below analyst expectations, it was well above last year’s build of 54 Bcf during the same week and slightly higher than the five-year average build of 75 Bcf. Traders were concerned that the next release of data, expected later in the week, would show a similar bearish rise in gas inventories. Henry Hub natural gas futures closed down 8.7 cents at $3.581 per MMBtu.
  4. On Wednesday, natural gas futures closed up as traders covered short positions following the drop in futures prices since Monday. Forecasts for colder weather next week helped push prices higher even as some traders remained concerned over rising inventories. Henry Hub natural gas futures closed up 3.8 cents at $3.619 per MMBtu.
  5. On Thursday, the EIA released its weekly natural gas inventory report for the week ended October 18, which showed a bearish 87 Bcf rise in natural gas inventories. The increase was above an already bearish estimate of 79 Bcf from industry analysts. Inventories now stand at 3,741 Bcf, which is 77 Bcf above the five-year average level for this time of year, but 92 Bcf below last year’s level. Weather forecasts continued to offer conflicting signals with the 6–10 day forecast showing moderate temperatures in the U.S. in November, while most parts of the region are currently experiencing below-average temperatures. Henry Hub natural gas futures closed for the day at $3.629 per MMBtu, up 1 cent.

Futures curve

The forward curve for WTI crude is in backwardation, with June 2014 WTI futures 2.6% lower than near-month (December) futures, primarily due to growing North American supply and concerns about a slowdown in global economic growth. However, June 2014 natural gas futures are at a premium of 6.2% over November 2013 futures due to expectations of moderate supply growth and higher demand from commercial and residential sectors in 2014.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 14.86 14.85 0.07%
Gasoline Demand (MMBPD) 9.07 8.80 3.07%
Distillate Demand (MMBPD) 3.33 3.73 -10.72%
Production (MMBPD) 7.90 7.43 6.33%
Imports (MMBPD) 7.66 8.00 -4.25%
Stocks (million barrels) 379.8 374.5 1.42%
Rotary Rig Count 1,361 1,367 -0.44%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 3,741 3,654 2.38%
Rotary Rig Count 372 369 0.81%
Horizontal Rig Count 1,099 1,106 -0.63%
Consumption (Bcf)* 1,910 (Jul 13) 1,727 (Jun 13) 10.60%
Gross Withdrawals (Bcf)* 2,552 (Jul 13) 2,453 (Jun 13) 4.03%
Canadian Imports (Bcf)* 225.9 (Jul 13) 228.9 (Jun 13) -1.31%
LNG Imports (Bcf)* 8.1 (Jul 13) 8.1 (Jun 13) NC

* The EIA does not provide weekly natural gas consumption, withdrawal and import numbers. Thus, the latest available monthly numbers are reported above.
NC – No Change;
Data source: U.S. Energy Information Administration (EIA)

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