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Weekly Oil & Gas Market Highlights: June 27, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures June 27, 2013 June 20, 2013 % Change
Oil – WTI
(USD per barrel)
$97.05 $95.40 1.7%
Oil – Western Canadian Select*
(USD per barrel)
$82.80 $81.87 1.1%
Oil – Brent
(USD per barrel)
$102.82 $102.15 0.7%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$3.58 $3.88 -7.6%

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 rebounded from earlier losses to close up 1.7% for this week primarily due to positive employment data from the U.S. and a pipeline shutdown in Canada. Prices fell earlier due to weak economic data from China and concerns over a possible slowdown in the Fed’s bond buying program.  

Closing price
Note: Intra-day prices (every 6 hours); June month futures expired on June 20, 2013.
Data source: Bloomberg

  1. Last Friday, during Asian trading, crude futures rebounded slightly as investors sought to purchase contracts at a discount following Thursday's selloff. Futures fell earlier as the Federal Reserve chairman indicated a potential timeline for ending the Fed's bond buying program, subject to economic conditions prevalent at that time. Later in the day, crude futures fell as China reported crude oil imports were down 6% in May from a year ago, which increased concerns about slowing economic growth in the country. During New York trading, the dollar strengthened versus a basket of currencies on continued speculation that the Fed may begin to curtail its $85 billion bond repurchase program as early as September, which sent WTI futures lower. WTI crude futures for August delivery settled down $1.71 at $93.69 per barrel.
  2. On Monday, crude futures fell as the state-run Xinhua news agency in China announced the Chinese government would not act to ease a liquidity shortage in the country. The People's Bank of China also announced it will begin tightening its easy money policies. Inflation has been a point of concern for the government throughout the global economic slowdown. Oil futures began rising during New York trading as Canadian pipeline operators announced the shutdown of  a pipeline north of Cheecham, Alberta, due to a spill of an estimated 750 barrels as a result of heavy flooding in the region. Canadian crudes account for >25% of U.S. crude oil imports and the region around Cheecham is a major center of oil sands production. The Athabasca and Waupisoo pipelines have a combined capacity of 1.17 MMbbl/d. Crude futures also rose as a 415,000 bbl/d refinery in Whiting, Indiana, was restarted, increasing crude supply in the market. WTI crude futures closed for the day at $95.18 per barrel, up $1.49.
  3. On Tuesday, crude futures rose as the Department of Commerce reported durable goods sales increased 3.6% in May over April, exceeding analyst expectations. In other positive U.S. economic news, the Conference Board reported consumer confidence rose from 74.3 in May to 81.4 in June, the highest level in five years. Crude futures fell later in the day as the dollar continued to rise, which is bearish for crude. Reports that Canadian pipeline operators restored operations to part of the pipeline that was closed on Monday also put downward pressure on prices. WTI crude futures settled up $0.14 per barrel at $95.32 on the NYMEX.
  4. On Wednesday, crude futures fell initially following the release of the U.S. Energy Information Administration’s (EIA) weekly oil stocks report, which showed a bearish 3.7 MMbbl rise in gasoline stocks. Refineries were operating at over 90% capacity, up nearly 1% from a week ago. Oil stocks rose just 18,000 barrels, leaving them virtually unchanged from a week ago at 394.1 MMbbl. However, later, crude futures counter-intuitively rallied with the broader market even as the U.S. Department of Commerce revised down its estimate of first-quarter GDP growth to 1.8% from 2.4%. The downward revision reflected underlying weakness in the U.S. economy, which gave rise to speculation that the Fed would have to continue its bond buying program longer than previously anticipated. WTI crude futures rose $0.18 during the day to close at $95.50 per barrel.
  5. On Thursday, crude futures rose during Asian trading as China's National Bureau of Statistics announced Chinese industrial companies saw profits increase 16% in May versus a year ago. During New York trading, futures rose sharply as the U.S. Department of Labor reported new jobless claims fell by 9,000 to 346,000 claims. In other positive economic news, the Department of Commerce announced U.S. household purchases rose 0.3% in May, driven by a 0.5% increase in incomes. Crude futures rose $1.55 during the day to close at $97.05 per barrel.

Natural gas prices

U.S. Henry Hub natural gas futures fell sharply this week as revised summer weather forecasts showed below-average temperatures in most of the U.S. and the EIA reported a bearish inventory build. Traders are looking at a late-summer heat wave to support the natural gas prices.

Closing price
Note: Intra-day prices (every 6 hours); July month futures expired on June 26, 2013.
Data source: Bloomberg

  1. Last Friday, Henry Hub natural gas futures closed down for the second straight day as an extended forecast from the National Weather Service (NWS) showed warm temperatures easing in most part of the U.S. Nuclear power outages are at just 6% of the total capacity or 5,900 MW, down from 8,900 MW a year ago and a five-year average of 7,000 MW. Baker Hughes weekly rig data showed natural gas-directed rigs falling to 349, an 18-year low. Natural gas futures closed down 10.6 cents at $3.771 per MMBtu.
  2. On Monday, weather forecasts from the NWS revised during the weekend showed further weakening of summer temperatures in the U.S. Texas and much of the western United States will experience above-average temperatures while the eastern U.S. will experience average-to-slightly-above-average temperatures. Natural gas futures closed down 3.2 cents at $3.739 per MMBtu.
  3. On Tuesday, natural gas futures ended down for the fourth straight session. Some traders expected the weakening of warm temperatures to result in a modest build in gas inventories this week. The revised 6--10 day forecast from the NWS showed most of the country experiencing average-to-below-average temperatures, with only New England, the Pacific, and Mountain regions experiencing above-average temperatures. Natural gas futures for July delivery closed down 9.2 cents at $3.647 per MMBtu.
  4. NYMEX gas futures rose on Wednesday as traders went bargain-hunting following the recent selloff. The rise also came as the NWS revised its 6–10 day forecast, which showed above-average temperatures in the West receding while the 8–14 day forecast showed warm temperatures expanding again. With the end of June rapidly approaching, traders are hoping for a late-summer heat wave to boost natural gas demand. Henry Hub natural gas futures for July delivery expired up 6 cents at $3.707 per MMBtu while the August contract moved to the front-month position and closed up 6.7 cents at $3.737 per MMBTU.
  5. On Thursday, Henry Hub natural gas futures tumbled as the EIA released its weekly natural gas inventory report showing a net injection of 95 Bcf, which was above analyst expectations. Futures fell nearly 4% following the news. Working natural gas in storage now stands at 2,533 Bcf. August-month natural gas futures closed for the day at $3.582 per MMBtu, down 15.5 cents.

Futures curve

March 2014 WTI futures are 4.5% lower than current prices due to growing North American supply and weak demand growth in major economies globally. However, March 2014 natural gas futures are at a premium of 8% to near-month (August) 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) 15.70 15.53 1.09%
Gasoline Demand (MMBPD) 8.89 8.84 0.57%
Distillate Demand (MMBPD) 3.89 4.01 -2.99%
Production (MMBPD) 7.26 7.13 1.82%
Imports (MMBPD) 8.3 8.44 -1.66%
Stocks (million barrels) 394.1 394.1 NC
Rotary Rig Count 1,405 1,413 -0.57%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 2,533 2,438 3.90%
Rotary Rig Count 349 343 1.75%
Horizontal Rig Count 1,079 1,086 -0.64%
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%

Notes:
* 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)

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

Learn more

Deloitte Global Energy & Resources practice’s new report, 2013 Oil & Gas Reality Check explores the industry fundamentals of each trend – the supply, demand, macroeconomic, regulatory, cost, price, and competitive behavior factors. The paper provides insights and describes what may unfold over the short and the long term.

Deloitte’s new report Surveying Energy Attitudes: Industry Insiders and the Public's Outlook on the Future of U.S. Oil and Gas summarizes a survey conducted by Deloitte on 250 oil and gas professionals, as well as over 600 members of the general population.

Deloitte’s paper, Oil & Gas Mergers and Acquisitions Report – Year-end 2012: Stable oil prices support a healthy deal market covers deals from the past 12 months by sector and reveals the insights of Deloitte merger & acquisition (M&A) specialists on what is driving activity and what this says about how the business is changing, as the oil and gas industry continued to demonstrate strong M&A activity in 2012.

Deloitte's paper Exporting the American Renaissance: Global impacts of LNG exports from the United States describes an objective, economic-based analysis of the potential impact of LNG exports from the United States on domestic and global markets. While much attention has focused on the impact of U.S. LNG exports on the U.S. market, this study from Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions analyzes the potential economic consequences of those exports on global markets. It attempts to estimate the potential price impacts, gas supply changes, and flow displacements if the U.S. exported a given volume of LNG to either Asia or Europe.

Deloitte's 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 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.

Save these dates

July 25, 2013
The Realities of Demand Moderation and Energy Efficiency
Join us for a discussion exploring what the future might hold for U.S. utilities as they manage rising capital costs, escalating operational costs, and decreased demand for electricity as their customers are evolving into more informed energy consumers. Space is limited – register today! For more information contact Soy Lee.

September 18-20, 2013
2013 Deloitte Alternative Energy Seminar – Innovation: Changing the Future of Alternative Energy
This seminar focuses on the unique business, tax, and accounting issues affecting companies operating or investing in the alternative energy sector. Plenary sessions will examine the future of alternative energy and ways innovative thinking is making the difference in addressing the challenges and opportunities the sector faces. These sessions will also explore how business strategies are adapting as a result of broader energy industry impacts such as energy management, competing technologies and a changing fuel mix. Elective sessions allow participants to delve into the unique business and technical issues faced by companies operating or investing in alternative and renewable energy.

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. 
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