This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print this page

Weekly Oil & Gas Market Highlights: July 26, 2012

Deloitte Center for Energy Solutions publication

Subscribe to the weekly Oil & Gas Market Highlights Memo Sign up to receive the weekly Oil & Gas Market Highlights Memo

Key Oil & Gas Price Indicators

Front Month Futures (August) July 26, 2012 July 19, 2012 % Change
Oil – WTI
(USD per barrel)
$89.39 $92.66 -3.53%
Oil – Brent
(USD per barrel)
$105.26 $107.80 -2.36%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$3.09 $3.00 3.66%

Data sources: Bloomberg; CME Group

Crude Oil Prices

WTI crude futures fell 3.5% and closed below $90 per barrel due to profit-booking, Euro-zone concerns, and higher-than-expected build-up in oil and gasoline stocks. The opening of two oil pipelines bypassing the Strait of Hormuz has lowered the supply-risk premium in oil prices.

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

  1. On Friday (July 20), September crude futures prices trended downward during the day. Crude futures faltered overnight as traders in Asia processed the impact of Thursday’s weak economic reports from the U.S. and on profit-taking after the recent ~10% run-up in the price. Some analysts believe that the market may have overpriced the likelihood of Iran closing the Strait of Hormuz, given the robust U.S. military presence in the region. Additionally, Saudi Arabia has reopened its trans-Arabian pipeline that will bypass the Strait and the United Arab Emirates (UAE) has opened a trans-UAE pipeline that bypasses the Strait to reach the Gulf of Oman at Fujairah. Brent crude rose on news that the Buzzard oil field will be closed for four weeks for maintenance. WTI futures for August expired on Friday and the September contract closed at $91.83 per barrel, down $1.14 for the day. Brent futures closed at $106.74 per barrel, down $1.06.
  2. Crude oil futures fell 4% on Monday as renewed economic concerns about Europe dominated the market and fears over Iran abated. The European Central Bank (ECB) said that it would reject the use of Greek bonds as collateral for loans until Greece’s financial situation becomes clear. The Bank of Spain announced that the country’s GDP fell 0.4% during the second quarter, down 1% year-on-year. The economic news overshadowed the news of an explosion at a 450,000 bbl/d pipeline in Turkey, which continued to operate at a 300,000 bpd capacity. In Columbia, the Cano-Limon pipeline was attacked by rebel FARC forces. Cano-Limon has a 220,000 bbl/d capacity, but normally pumps only 80,000 bbl/d. Currently, overall crude trading volumes are light as it is the summer holiday season, which means that even minor trades can move the market price. Crude futures were down >$5 during the prior two days of trading.
  3. On Tuesday, futures opened higher in Asia as HSBC’s Purchasing Manager’s Index (PMI) rose from 48.2 in June to 49.5 in July. However, any number below 50 still indicates contraction, so the figure is still bearish, but is an indication that manufacturing activity shrank less in July. The Chinese economy accounts for ~40% of the projected growth in global oil demand, so the economic conditions in China have a significant effect on the price of crude futures. Over the weekend, an official at the People’s Bank of China said that Chinese domestic demand is expected to remain weak in the short term. European and U.S. economic news was less positive. Germany’s PMI fell at the fastest rate since 2009 and the German service sector also shrank. France’s PMI showed similar results. Markit’s Eurozone Composite PMI remained at 46.4, indicating continued retraction. Meanwhile in the U.S., although the PMI increased 1.9% in the first quarter, it grew at the slowest pace since the end of 2010. Many economists expect second-quarter data will show ~0.5% decline in the rate of growth. OECD countries are expected to experience an overall decline in crude demand in the short term. Analysts believe that the economic outlook for OECD countries is so bleak that central banks will have little choice but to engage in further easing.
  4. Crude futures trading was muted in Asia on Wednesday as traders waited for the latest oil stocks data from the U.S. Energy Information Administration (EIA). The International Monetary Fund (IMF) stated that it expects China to have a soft landing during the downturn but is concerned about the contagion effects of Greek and Spanish debt problems. Crude futures dropped after the EIA’s crude oil stocks report showed a large build of 2.7 million barrels, where analysts had expected a modest decline. Total stocks are now at 380.1 million barrels. EIA data since 1982 shows commercially available crude stocks were at an all-time high during the week of July 27, 1990, at 391.9 million barrels — oil stock data over the past few weeks is hovering just below the 390 million barrel threshold. Gasoline stocks also rose by 4.1 million barrels as gasoline output exceeded demand by 600,000 bbl/d, fueled by a growing export market for U.S. petroleum products in Latin America. U.S. gasoline demand was 8.66 MMbbl/d, down 3.8% year-on-year as a result of continued weak economic conditions. However, prices recovered later in the day on continued geopolitical concerns.
  5. During the day on Wednesday, Iranian leaders met privately to discuss the economic situation in the country in light of the Western-backed oil sanctions. The Iranian economy is highly dependent on oil revenues from exports. The U.S. Department of Energy estimates that current Iranian exports are in the range of 1.1–1.3 MMbbl/d. At current prices and with slight adjustment for currency moves in the Iranian rial (the Iranian government budget used 12,660 as the official rate, but the current market rate is ~12,250), this yields an annual oil revenue figure of $41-$49 billion. A budget of $453 billion was approved in March, the beginning of the fiscal year in Iran, with most of it earmarked for the state sectors of the economy. However, the government anticipated ~$49 billion in oil revenues on a forecast of $85 per barrel and a total deficit of ~$6 billion. Iran is still maintaining many domestic subsidies, but it will phase out food subsidies, which is expected to add an additional 15% to inflation, which is currently at 8.9%. The additional inflation will increase the currency pressure on revenues and exports may continue to decline because Western-insured ships are unable to lift Iranian crude. Most of what Iran is able to export is heading to China and India. Iran’s highest total production of oil was 6 MMbbl/d in the early 1970s.
  6. Oil futures rose on Thursday as the ECB announced that it will intervene to lower Spain’s borrowing costs and pledged full support for the continuation of the euro. Positive economic news from the U.S. also bolstered prices. The Department of Commerce reported that U.S. durable goods orders were up 1.6%, while the Department of Labor reported that new jobless claims fell by 35,000 to 353,000, well above analyst expectations. Meanwhile, OPEC is expected to reduce total exports by mid-August as refiners undergo seasonal maintenance. OPEC output is expected to decline by ~0.3% to 23.89 MMbbl/d from 23.91 MMbbl/d currently.

Natural Gas Prices

Natural gas futures increased 3.7% and closed just below $3.10 per MMBtu, underpinned by expected build-up in inventories and warm weather forecast for the next two weeks. However, analysts are concerned about storage overhang, strong production levels, and increasing probability of utilities switching back to coal for power generation.

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

  1. Natural gas September-month futures rose by 3.2% on Friday as the EIA reported that natural gas storage builds continued to lag average builds for this time of year. Natural gas in storage rose 28 Bcf, below analyst expectations of a 34 Bcf rise. However, natural gas in storage and natural gas production are hovering just below record highs. Forecasts of warm weather over the next two weeks also helped boost prices. Meanwhile, the price spread between Central Appalachian coal prices and Henry Hub futures reached ~95 cents per MMBtu, enough to begin to discourage power producers from using gas over coal for electricity generation.
  2. NYMEX Henry Hub futures continued to climb on Monday, driven by the current bull market that broke through January’s high and the 200-day moving average. However, many traders believe that the current bull market may be peaking as they note the 14-day relative strength index entered the overbought territory above 80% on Monday. Additionally, the summer cooling season is ending in a few weeks. AccuWeather expects temperatures to average above normal for most part of the week.
  3. On Tuesday, bulls continued to drive gas futures prices higher as traders speculated on the continued warm weather. Futures prices are nearing a seven-month high as outages at nuclear power plants reached 9,400 MW or 9% of total U.S. capacity, down from 10,200 MW on Monday but well above 3,400 MW a year ago.
  4. Prices tumbled 3.9% on Wednesday on profit-taking, as analysts noted that the contract price was well in the overbought territory. The decline in the front-month contract price widened the spread to the winter-month contracts, with the December contract trading 39.4 cents higher than the September contract. The spread fell to 33.8 cents on Tuesday, the lowest level in two years.
  5. On Thursday, natural gas futures teetered up and down as the EIA released its weekly natural gas inventory report, showing a 26 Bcf increase in natural gas, which matched analysts’ expectations. Open futures contracts declined by 20,000 during Wednesday’s sell-off, which is indicative of profit-taking rather than shorting. However, total U.S. gas storage is at 80%, a level not usually reached until September.

Futures Curve

U.S. Henry Hub natural gas is in “contango” due to the limited storage capacity (current natural gas inventories are 15% higher than the five-year average).  Despite the recent price rally, March 2013 natural gas futures are still 15% higher than spot price, compared to just 2% for oil.

Data source: Factset

Weekly U.S. Crude Oil and Natural Gas Data

Crude Oil
Indicators This Period* Prior Period* % Change
Refinery Inputs (MMBPD) 15.80 15.54 1.65%
Gasoline Demand (MMBPD) 8.66 8.63 0.35%
Distillate Demand (MMBPD) 3.48 3.37 3.45%
Production (MMBPD) 6.36 6.25 1.91%
Imports (MMBPD) 9.63 8.94 7.79%
Stocks (million barrels) 380.1 377.4 0.72%
Rotary Rig Count 1,414 1,427 -0.91%
Natural Gas*
Indicators This Period* Prior Period* % Change
Consumption (Bcf)** 1,944 (Apr 12) 2,110 (Mar 12) -7.85%
Gross Withdrawals (Bcf)** 2,450 (Apr 12) 2,539 (Mar 12) -3.51%
Canadian Imports (Bcf)** 246.91 (Apr 12) 246.88 (Mar 12) 0.01%
LNG Imports (Bcf)** 7.55 (Apr 12) 19.27 (Mar 12) -60.82%
Working Storage (Bcf) 3,189 3,163 0.82%
Rotary Rig Count 518 522 -0.77%
Horizontal Rig Count 1,164 1,166 -0.17%

*The EIA did not release a natural gas report this week due to the U.S. Independence Day holiday. Thus, this period data is for the week ending June 27 and prior period data is for the week ending June 20.
**The EIA does not provide weekly natural gas consumption, withdrawals, and imports numbers. Thus, the latest available monthly numbers are reported above.
Data source: U.S. Energy Information Administration (EIA)

Comments and questions welcomed. Please contact

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.

Save this date

November 13, 2012
Deloitte Oil & Gas Conference – Houston, TX
For more information on the 2012 Deloitte Oil & Gas Conference please contact

May 21-22, 2013
Deloitte Energy Conference – Washington, DC
For more information or to obtain a synopsis of the 2011 Deloitte Energy Conference, please contact

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.

As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Share this page

Email this Send to LinkedIn Send to Facebook Tweet this More sharing options

Stay connected