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Weekly Oil & Gas Market Highlights: May 16, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures May 16, 2013 May 9, 2012 % Change
Oil – WTI
(USD per barrel)
$95.16 $96.39 -1.3%
Oil – Western Canadian Select*
(USD per barrel)
$74.70 $74.69 0.0%
Oil – Brent
(USD per barrel)
$103.80 $104.47 -0.6%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$3.93 $3.98 -1.3%

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 fell throughout the week before partially rebounding on Thursday due to tensions in the Middle East and a possible extension of the U.S. stimulus program. Earlier, futures fell due to weak economic data from China, Eurozone, and the U.S., and a report on rising OPEC crude supply.

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

  1. Last Friday, WTI crude futures fell during overnight trading on concerns about growing supply and sluggish demand as U.S. oil stocks rose last week to 395.50 MMbbl, the highest level in more than 30 years. Futures fell over 3% later in the day as Organization of the Petroleum Exporting Countries (OPEC) released its monthly oil market report that highlighted slowing economic growth in China and continued weakness in the Eurozone economies as hindrances to global economic growth. Crude futures also came under downward pressure as it was reported that the Federal Reserve has developed a plan to wind down its current bond buying program, which strengthened the U.S. dollar. Futures rebounded in afternoon trading as the dollar index eased to 83.151 from the earlier high of 83.438. WTI futures closed for the day at $96.04 per barrel, down $0.35.
  2. On Monday, crude futures fell during Asian trading as the dollar rose, boosted by expectations that the Fed has plans to end its bond buying program. Also weighing on futures, China’s National Bureau of Statistics released data on Monday showing industrial output in April up 9.3% year-on-year, but down from 9.5% in March. China’s refinery demand from crude was also down 3% from March, but up 2.5% from a year ago. In response to the data, OPEC reduced its 2012 oil demand estimate for China by 20,000 bbl/d. Crude futures closed down $0.87 per barrel at $95.17 on the NYMEX.
  3. On Tuesday, oil exports from Kirkuk, Iraq, resumed through a 0.30 MMbbl/d pipeline that was attacked by bandits last week. Crude futures came under downward pressure later in the day as the International Energy Agency (IEA) released data showing that OPEC’s crude oil output increased by 200,000 bbl/d to 30.7 MMbbl/d in April, an excess supply of 1.8 MMbbl/d, according to the agency. The IEA maintained its oil demand growth estimate at 0.79 MMbbl/d. Also bearish for crude demand, the agency said that growing U.S. supplies are “transformative” for world oil markets and that North America will provide 40% of the world’s new supply through 2018. WTI crude futures closed down $0.96 cents at $94.21 per barrel.
  4. On Wednesday, crude futures fell as Eurostat reported that the Eurozone economy contracted 0.2% in the first quarter of this year after falling 0.6% in the last quarter of 2012. It was the sixth consecutive quarter of economic contraction in the region. The Eurozone economy is down 1% from last year. During New York trading, futures extended their losses as the Federal Reserve reported that U.S. industrial production fell by 0.5% in April from a 0.3% increase in March. Futures began to rise however as speculation increased that the Fed would have to shelve plans to reduce its bond buying program in order to bolster the economy. Crude futures rose as the Energy Information Administration (EIA) released data showing that crude stockpiles fell by 624,000 barrels to 394.9 MMbbl. Analysts had expected to see a build in inventories this week. The prior week, crude stockpiles were at the highest levels since 1931. WTI crude futures rose $0.09, overcoming earlier losses to close at $94.30 per barrel.
  5. On Thursday, crude futures gained as the International Atomic Energy Agency failed to reach an agreement with Iran to resume inspections at its nuclear facilities. Tensions between Iran and the West over its nuclear program have led to West-backed oil sanctions against Iran. Crude futures also rose later in the day as speculation increased that the Fed would need to keep stimulus programs in place in order to boost the economy. The stimulus speculation grew out of a bearish report from the Department of Labor showing that new jobless claims increased by 32,000 to 360,000 last week. The news also caused the dollar to fall against a basket of currencies, which is bullish for dollar-denominated crude demand. Crude futures closed for the day at $95.16, up $0.86.

Natural gas prices

U.S. Henry Hub natural gas futures rose during the week due to lower-than-average temperatures in Northeast U.S. However, futures fell sharply on Thursday to close down 5.1 cents for the week as the EIA reported a higher-than-expected natural gas inventory build of 99 Bcf.

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

  1. Last Friday, natural gas futures closed down following a bearish 88 Bcf build in natural gas inventories in the EIA’s weekly natural gas report. Natural gas in storage at 1,865 Bcf remains below the year-ago and five-year average levels, but traders expect to see large builds with moderating temperatures as summer approaches. Baker Hughes reported that the natural gas rig count fell by 4 rigs to 350 this week. Henry Hub natural gas futures closed down 7.3 cents at $3.91 per MMBtu. Futures have fallen 11% over the past three weeks.
  2. On Monday, natural gas futures rose during the day as investors viewed the market as oversold. Investors found support in current below-average temperatures in the Northeast, which helped to increase demand. However, weather forecasts from the National Weather Service (NWS) show above-average temperatures covering the Northeast in the 6–10 day outlook. Natural gas futures closed up 1.5 cents at $3.925 per MMBtu.
  3. Natural gas futures extended their gains driven by continued cooler-than-average temperatures in the Northeast and natural gas inventories that remain below the year-ago figure and the five-year average. Some traders took positions ahead of EIA’s weekly natural gas report, which some expected to show a lower-than-expected build due to temperature-driven demand in the Northeast this week. Natural gas futures closed up 9.9 cents at $4.024 per MMBtu.
  4. On Wednesday, natural gas futures held on to recent gains above $4.00 per MMBtu. However, some traders questioned the durability of $4.00 gas as temperatures are expected to moderate and demand to soften until the onset of summer air-conditioning season. The upside has come during relatively light trading during the week, which may indicate weakness in the upside trend. Henry Hub natural gas futures closed up 4.6 cents at $4.07 per MMBtu.
  5. Natural gas futures tumbled more than 10 cents on Thursday as the EIA released data showing a bearish 99 Bcf build in natural gas inventories, higher than analyst expectations. The build compared bearishly with an average build of 83 Bcf for the same period last year. Natural gas inventories are currently at 1,964 Bcf.

Futures curve

January 2014 WTI futures are 1.5% lower than current prices due to growing North American supply and weak demand growth in major economies globally. However, January 2014 natural gas futures are at a premium of 10.3% to near-month (June) futures due to moderating supply growth, expectations of winter demand, 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) 15.25 15.18 0.46%
Gasoline Demand (MMBPD) 8.34 8.44 -1.18%
Distillate Demand (MMBPD) 3.57 3.66 -2.46%
Production (MMBPD) 7.32 7.37 -0.68%
Imports (MMBPD) 7.62 7.61 0.13%
Stocks (million barrels) 394.9 395.5 -0.15%
Rotary Rig Count 1,412 1,403 0.64%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 1,964 1,865 5.31%
Rotary Rig Count 350 354 -1.13%
Horizontal Rig Count 1,099 1,092 0.64%
Consumption (Bcf)* 2,557 (Feb 13) 2,863 (Jan 13) -10.69%
Gross Withdrawals (Bcf)* 2,320 (Feb 13) 2,542 (Jan 13) -8.73%
Canadian Imports (Bcf)* 228.8 (Feb 13) 262.9 (Jan 13) -12.97%
LNG Imports (Bcf)* 11.4 (Feb 13) 13.5 (Jan 13) -15.56%

Notes:
* The EIA does not provide weekly natural gas consumption, withdrawal, and import numbers. Thus, the latest available monthly numbers are reported above.
Data source: U.S. Energy Information Administration (EIA)

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

Learn more

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

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 EnergyConference@deloitte.com

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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