Weekly Oil & Gas Market Highlights: June 21, 2012
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators for the prior seven days
|Crude oil, USD per bbl||Noon (EDT) on Thursday, 6/21/12||Noon (EDT) on Thursday, 6/14/12|
|Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures||$79.70 (August-2012 Contract)||$83.30 (July-2012 Contract)|
|WTI Cushing Spot||$79.31||$83.40|
|Dated Brent Spot||$90.33||$96.84|
|Natural gas, USD per MMBtu||Noon (EDT) on Thursday, 6/21/12||Noon (EDT) on Thursday, 6/14/12|
|Front-Month NYMEX Henry Hub Futures||$2.63 (August-2012 Contract)||$2.39 (July-2012 Contract)|
|Henry Hub Spot||$2.61||$2.18|
Data sources: Bloomberg; CME Group
Oil & Gas highlights
- NYMEX WTI crude futures for August ended the week down as global crude demand is expected to slump due to expectations of a double-dip recession in Europe and increasing global crude supplies. Anticipated easing by the Fed did little to boost prices as a $250 billion continuation of Operation Twist is not expected to provide the needed economic injection to boost the U.S. economy.
- Last Friday, crude futures traded sideways in Asia and Europe as hopes of further economic stimulus rose, but concerns about the outcome of the Greek elections over the weekend kept market participants from taking an upside position until the results are known. Prices began to fall as New York manufacturing data was released, which showed that manufacturing activity in May fell 0.1%, which is the lowest level since November of 2011. WTI Futures closed out the week at $84.03 per barrel on the NYMEX.
- News from the Greek elections over the weekend helped crude open higher on Monday. The pro-bailout New Democracy party secured a win in Greece, which indicates that the country will not leave the euro or at least not in the very near future. However, the oil demand outlook quickly turned bleak as the 10-year Spanish bond yield crossed the 7% threshold triggering a mild panic that Europe was heading inexorably into a contraction. Spain is Europe’s 4th largest economy and a recession there could pull the whole continent into a recession. WTI futures for July settled down ~1% at $83.27 per barrel while Brent, the crude used in Europe, tumbled 1.6% or $1.56 to close at $96.05 per barrel.
- In Tuesday trading, oil futures prices staged a recovery as traders in London believed that Spain’s borrowing costs, though alarming, are still below the level that would require the country to get a bailout. However, Germany’s economic expectations index published by ZEW plummeted into negative territory, indicating a majority of those surveyed believe the economic outlook there will get worse. The index fell to -16.9 in June from 10.8 in May. It is the steepest decline in the index in nearly fifteen years. Business confidence also fell in France, but much more modestly. With the economic outlook bleak across most of the world, traders began bidding up the price of futures on expectations that the Federal Reserve would have little choice but to engage in additional stimulus. Such action would put pressure on the dollar, which naturally would increase the price of dollar-denominated crude.
- Crude futures rose slightly Wednesday as European leaders announced at the G20 meeting in Mexico that they would begin integrating their banking systems, which would strengthen their ability to control the debt crisis in Europe. Oil futures began falling in anticipation of the Energy Information Administration’s (EIA) weekly oil stocks report. As prices slid, they received a slight upward tick when Federal Reserve Chairman Ben Bernanke announced that the Fed would extend “Operation Twist”, designed to keep long-term interest rates low, through the rest of the year. Prices, however, tumbled further as the EIA announced that inventories rose by 2.9 million barrels last week to the highest levels seen in nearly a quarter century. Gasoline inventories also rose by just under one million barrels. U.S. crude production also increased to 6.35 MMbbl/d the highest level since 1999. WTI futures closed down 2.7% at $81.80 per barrel.
- On Thursday, crude futures fell through the support at $80 per barrel. China announced its eighth straight month of falling manufacturing activity. China’s Bureau of Customs also announced that its imports of crude from Iran hit a 2012 high of ~525,000 barrels per day, a 35% increase since April. Prices fell through the $80 support on a barrage of poor economic indicators out of the U.S. The Department of Labor announced that jobless claims decreased by only 2,000 to 387,000 for the prior week. The euro also declined against the dollar and the Fed’s announcement yesterday that it had reduced its estimate of U.S. economic growth for the year to 1.9% to 2.4% down half a percentage from its prior estimate.
- The EIA reported NYMEX WTI crude futures fell $0.07 last week to $84.03 per barrel, which is down $8.98 from a year ago. Crude stocks rose 2.9 million barrels to 387.3 million barrels. Stocks are 23.5 million barrels higher than a year ago.
- The average retail gasoline price fell $0.039 last week to $3.53 a gallon while gasoline stocks rose 0.9 MMbbl to 202.7 million barrels, which is down 11.9 MMbbl from last year.
- The average retail diesel price was down $0.052 to $3.729 per gallon.
- Distillate stocks were up by 1.2 million barrels to 121.1 million barrels, down 20.9 million barrels from a year ago.
Natural Gas highlights
- The EIA reported the Henry Hub spot price was up $0.42 last week closing at $2.60 per MMBtu. The NYMEX July 2012 natural gas futures contract rose 33.2 cents to $2.517 per MMBtu. Temperatures reached 100 degrees in parts of the Northeast.
- The domestic natural gas supply was up 1% last week led by a 0.9% increase in domestic production. The natural gas rotary rig count fell by 3 rigs to 562. Oil-directed rigs were down 9 rigs to 1,405.
- Working natural gas in storage increased 62 Bcf to 3,006 Bcf, which is up 680 Bcf over last year.
- Domestic natural gas consumption increased by 2.3% over the prior week led by a 7.1 increase in demand from the power generation sector. Demand fell in the other sectors with industrial demand down by 0.9% and the residential/commercial sector down by 5%.
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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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