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Weekly Oil & Gas Market Highlights: April 19, 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, 4/19/12 Noon (EDT) on Thursday, 4/12/12
Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures $102.81 (June-2012 Contract) $103.92 (May-2012 Contract)
WTI Cushing Spot $102.41 $103.94
Dated Brent Spot $117.83 $120.92
Natural gas, USD per MMBtu Noon (EDT) on Thursday, 4/19/12 Noon (EDT) on Thursday, 4/12/12
Front-Month NYMEX Henry Hub Futures $1.91 (June-2012 Contract) $2.01 (May-2012 Contract)
Henry Hub Spot $1.88 $1.91

Data sources: Bloomberg; CME Group

Oil & Gas highlights

  • NYMEX WTI crude futures for June ended down for the week on bearish fundamentals and a poor U.S. jobs report from the U.S. Department of Labor.
  • Last Friday, crude futures fell in Asia as news that China’s GDP grew by only 8.1% in the first quarter, which was below analyst expectations for 8.3% growth.  An economic slowdown in China would be bearish for crude futures, since the country is the second largest oil importer in the world.  In addition, ongoing tensions with Iran, where things have remained quiet in recent weeks, are keeping a floor on prices.    WTI crude futures prices settled at $102.83 per barrel in New York on Friday as the May futures contract expired.  As the contract neared expiration, the backwardation between the May and June contract narrowed to 15 cents.
  • Over the weekend, six world powers and Iran held talks over the country’s nuclear program.  Unsurprisingly, no concrete decisions were announced as a result of the ten hour meeting.  However, participants did agree to meet again in Baghdad on May 23.
  • On Monday, crude futures opened lower on the possibility of a temporary easing of tensions with Iran.  Renewed fears over euro-zone debt levels, seen in a rise in the borrowing cost to the Spanish government, also pushed crude futures prices lower.  Currently, prices are in an easing period as China’s economic growth seems to be slowing, petroleum products demand in OECD economies is weakening, and Saudi production is at a post-1980 peak (11.1 MMbbl/d in 2011) according to the Energy Information Administration (EIA).  Futures prices surged in mid-day trading after an Enbridge spokesman announced that the company would reverse the flow of the Seaway pipeline around May 17, ahead of its original June 1 deadline.  Actual deliveries to the Gulf Coast would come later.  The reversed Seaway pipeline will be able to transport up to 150,000 bpd of oil from Cushing, OK to refineries on the Gulf Coast this year.  Next year, the company plans to expand its capacity to 400,000 bpd.
  • In Tuesday trading, futures prices rose as a new Spanish bond auction attracted better than expected results, which allayed fears about further Eurozone debt worries.  Separately, the Center for European Economic Research (ZEW) released its April data showing that economic expectations rose to 23.4 above March’s 22.3 figure.  Crude futures also rose on news that the International Monetary Fund increased its 2012 economic growth forecast from 3.3% to 3.5%.  News of the accelerated schedule of the Seaway pipeline reversal continued to send WTI prices upward with the heavily traded Brent/WTI spread narrowing to under $14 for the first time since February.  Crude stocks at Cushing have been accumulating in anticipation of the reversal.  Currently, they are 27% higher than in November when the reversal was first announced.
  • On Wednesday, crude futures trended downward during the day as traders waited for news from the EIA about oil stocks for the prior week.  Futures prices tumbled when the EIA’s data showed that crude oil stocks rose by 3.9 MMbbl last week, well ahead of analyst expectations.  The data also showed gasoline stocks drawing down rapidly falling 3.7 MMbbl beating analyst expectations for a 1 MMbbl decline.
  • Thursday futures prices climbed after Spain’s second bond auction this week sold more than the targeted number of bonds ($3.3 billion).  However prices fell as the Department of Labor announced that new jobless claims fell by on 2,000 to 386,000 less than analyst expectations.  The Department of Labor also revised last week’s total unemployed figure up from last week’s reported 380,000 to 388,000 as more Americans are entering the job market.
    • The EIA reported NYMEX crude futures prices closed at $102.83 last week, which is down $6.83 from last year.  Crude stocks rose by 3.9 MMbbl to 369 million barrels.  Stocks are 12.1 million barrels higher than a year ago.
    • The average retail gasoline price fell $0.017 last week to $3.92 a gallon.  Prices were up $0.07 over last year.  Gasoline stocks fell 3.7 MMbbl to 214 million barrels, which is up 5.9 MMbbl from the same time last year.
    • The average retail diesel price fell $0.021 rising to $4.127 a gallon.
    • Distillate stocks were down by 2.9 million barrels to 129 million barrels.

Natural Gas highlights

  • The EIA reported Henry Hub spot prices dropped last week by 3.3 cents (1.7%) to $1.87 per MMBtu.  Temperatures approach the 30-year average being only 0.3 degrees warmer.
  • Domestic natural gas production fell 0.6% last week and is up 5.7% year on year.  U.S. gas imports from Canada were up 1.2%, but down 6.7% year on year.  The natural gas rotary rig count fell by 23 rigs to 624.  Oil-directed rigs were down by 7 to 1,322.
  • Working natural gas in storage was up 25 Bcf to 2,512 Bcf.
  • Domestic natural gas consumption fell 4.5% percent from the previous week with the residential/commercial sector falling 17.4% and the industrial sector was down 3.0%, but the power sector was up 7.8%.

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

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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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.

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