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Weekly Oil & Gas Market Highlights: May 31, 2012

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators for the prior seven days

Crude oil, USD per bbl Noon (EDT) on Thursday, 5/31/12 Noon (EDT) on Thursday, 5/24/12
Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures $86.39 (July-2012 Contract) $90.99 (June-2012 Contract)
WTI Cushing Spot $86.53 $90.92
Dated Brent Spot $101.90 $107.34
Natural gas, USD per MMBtu Noon (EDT) on Thursday, 5/31/12 Noon (EDT) on Thursday, 5/24/12
Front-Month NYMEX Henry Hub Futures $2.44 (July-2012 Contract) $2.71 (June-2012 Contract)
Henry Hub Spot $2.39 $2.60

Data sources: Bloomberg; CME Group

Oil & Gas highlights

  • NYMEX WTI crude futures for July fell during the week as the euro debt crisis seemed poised to spread from Greece to Spain and the economic picture in the United States and China dimmed.
  • Last Friday, crude futures remained largely range bound between $90 and $92 per barrel as trader’s processed the news coming out of Greece and the talks with Iran to determine a dominant market trend. Positive European economic news came as France announced that the country’s consumer confidence rose a point to 90 in May, a level not seen since November of 2010. German consumer confidence, however, remained unchanged. Meanwhile, The European manufacturing and Purchasing Managers Index fell to 45 in May from 46.5 in April. Providing a slight upside to the market was the postponement of the six-party talks with Iran until June 18 – 19 in Moscow. WTI futures have fallen more than 15% off of February highs approaching $110 a barrel. Light sweet crude for July delivery settled up 20 cents to $90.86 per barrel. Brent closed at $106.83 a barrel on Friday, up 28 cents.
  • Trading was thin on Monday due to the holiday in the U.S. In Asian trading, futures found an upside in news that four separate polls in Greece showed the pro-austerity conservative New Democracy party in first place in the polls. If the trend holds, the party could gain enough seats to form a governing coalition with the pro-austerity Socialist party PASOK. The front-month July contract was up ~$1.00 to close at $91.86 per barrel.
  • On Tuesday, the fall of the euro along with the broader European market sent crude futures slightly higher. However, crude futures prices began to fall as Spain announced that April retail sales fell 9.8% from last year, the largest sales decline in the country since 2003. The Spanish government also announced it is on track to meet its budget deficit targets this year despite a rise in the government budget deficit to 2.4% of GDP from January to April, up from 1.9% of GDP during January to March. In U.S. economic news, the Conference Board released its consumer confidence report, which showed that consumer confidence fell from 68.7 in April to 64.9 in May. The International Energy Agency announced that Iranian oil deliveries in April were down ~1.0 MMbbl/d from the 2011 average of 2.5 MMbbl/d.
  • Crude futures fell on Wednesday as China’s official Xinhua news agency said that the government would not embark on a massive stimulus plan for the economy. Crude analysts had seen the potential for expansionist policies by China as a possible driver of crude demand. Crude futures fell another 1% as the borrowing costs for the Spanish government rose to alarming levels. The yield on the 10-year Spanish government bond rose to 6.67%, the highest level since the country joined the euro zone. The difference between the Spanish yield and safe-haven yields in Germany was a record 5.35 percentage points. The cost of borrowing to the Spanish government was close to the same level that led Greece and Ireland to ask for an international bailout at the beginning of the Eurozone debt crisis. The news sent the dollar soaring versus the euro, which weighed heavily on the futures price. During the day, futures prices fell 3% to their lowest level in seven months as WTI futures settled at $87.82, down 3.2% and Brent futures settled down $3.41 at $103.27.
  • On Thursday, crude futures continued into bearish territory as Fitch ratings cut the credit ratings of eight Spanish regions increasing concerns that Spain may be the next domino to fall in the on-going euro debt crisis. The Department of Labor announced that jobless claims rose by 10,000 during the week to 383,000 from a revised 373,000 the prior week. Futures prices fell a little over 2% on the news. Later in the day, the Energy Department released its weekly oil data showing that crude inventories rose 2.21 million barrels to 384.7 million, the 10th straight week of increases and the highest crude inventory level in 22 years. Futures prices are 20% lower than their February highs, the definition of a bear market.
    • The Energy Information Administration (EIA) reported NYMEX WTI crude futures prices fell $0.62 last week to $90.86 per barrel. Crude stocks rose 2.2 million barrels to 384.7 million barrels. Stocks are 10.9 million barrels higher than a year ago.
    • The average retail gasoline price fell $0.045 last week to $3.67 a gallon while gasoline stocks fell 0.8 MMbbl to 200.2 million barrels, which is down 12.1 MMbbl from last year.
    • The average retail diesel price was $3.89 per gallon down $0.059.
    • Distillate stocks were down by 1.7 million barrels to 117.8 million barrels, down 22.3 million barrels year on year.

Natural Gas highlights

  • The EIA reported the Henry Hub spot price was down $0.21 per MMBtu over the past week to close at $2.39 per MMBtu. The NYMEX July 2012 natural gas futures contract fell 30.8 cents (11%) to $2.429 per MMBtu. The average temperature in the lower 48 States was 67.6 degrees, 3.6 degrees above the 30-year average and up 1.6degrees year on year.
  • The domestic natural gas supply was up 1.4% last week. The natural gas rotary rig count fell by 6 rigs to 594. Oil-directed rigs were up 1 rig to 1,383.
  • Working natural gas in storage increased 71 Bcf to 2,815 Bcf, which is up 732 Bcf over last year.
  • Domestic natural gas consumption increased 3.5% from the previous week with power generation demand up 13.2%. Residential and commercial sector demand fell 8.2% and the industrial sector was down 1.8%.

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Learn more

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.

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