Weekly Oil & Gas Market Highlights: July 18, 2013
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators
|Front Month Futures||July 18, 2013||July 11, 2013||% Change|
|Oil – WTI
(USD per barrel)
|Oil – Western Canadian Select*
(USD per barrel)
|Oil – Brent
(USD per barrel)
|Natural Gas – U.S. Henry Hub
(USD per MMBtu)
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 rose 3% this week primarily due to a strong decline in U.S. unemployment data. Although moderating Chinese economic growth exerted a downward pull, positive economic data from the U.S. and a series of large declines in reported weekly crude inventories supported rising WTI prices and narrowed the Brent-WTI spread to less than $1 per barrel.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Crude futures fell during Asian trading last Friday as Chinese Minister of Finance Lou Jiwei reported the country’s economy may not meet its 7.5% growth target for 2013. However, he believes a 7% growth rate is achievable. Prices rose during European trading, as Iraq temporarily shut down a 1.65 MMbbl/d pipeline from Mosul, Iraq, to Ceyhan, Turkey, for repairs. The line was scheduled to resume pumping later in the day. During New York trading, futures rose on speculation U.S. crude inventories would continue to show a decline in the next release of the Energy Information Administration’s (EIA) weekly crude stocks report. Crude stockpiles have fallen by 20 MMbbl over the past two weeks, the largest two-week decline since the EIA began keeping record in 1982. WTI crude for August delivery closed up $1.04 at $105.95 per barrel. Brent closed up $1.08 at $108.81 per barrel, narrowing its premium to WTI to $2.86 a barrel.
- On Monday, crude futures rose as China reported its second-quarter GDP increased 7.5% year-over-year (YoY), in line with analyst expectations. The GDP growth was down slightly from the 7.7% registered in the first quarter, but oil consumption was up 11% YoY to just under 10 MMbbl/d. Futures fell later, however, as China’s June-month industrial output growth rate, at 8.9%, was below analyst expectations. During New York trading, futures fell as the Department of Commerce reported U.S. retail sales grew just 0.4% last month, only half the amount analysts expected. However, continued unrest in Egypt, which controls the Suez canal, helped buoy oil futures later in the day as protestors called for mass demonstrations to demand the return to office of ousted President Mohammed Morsi. WTI futures closed up $0.37 at $106.32 per barrel on the NYMEX.
- On Tuesday, crude futures moved up during early trading on expectations of another draw on U.S. crude inventories this week. Investors are eyeing increased summer output from U.S. refineries to meet rising summer gasoline demand. The American Petroleum Institute’s weekly oil report, a less-closely watched report due to its reliance on self-reporting by industry, forecast a 2.6 MMbbl decline in crude stocks this week. Crude futures declined later in the day as the Labor Department reported U.S. consumer prices rose at a 1.8% annualized rate, higher than analyst expectations. The news increased concerns about an impending end to the $85 billion per month bond-buying program by the Federal Reserve. Reinforcing the view, Esther George, president of the Federal Reserve Bank in Kansas City, stated the Fed should begin winding down its bond-buying program soon. WTI crude futures eased $0.32 to close at $106.00 per barrel.
- Crude futures rose on Wednesday as the EIA released its weekly oil stocks report, which showed a 6.9 MMbbl drop in inventories, the third straight week of declines. Crude stockpiles have fallen nearly 27 MMbbl over the past three weeks and are currently at 367.0 MMbbl, the lowest level since mid-January. News of the decline in crude stocks overrode concerns emanating from a Congressional testimony by Federal Reserve Chairmen Ben Bernanke about the potential winding down of the Fed’s bond buying program, which he speculated might come to a close in mid-2014. Light sweet crude for August delivery closed up $0.48 at $106.48 per barrel.
- On Thursday, crude futures fell slightly during Asian trading as a Bloomberg report estimated China produced 4.26 MMbbl/d of crude in June, the highest amount since November 2010. Also in supply news, Saudi Arabia exported 7.79 MMbbl/d in May, the highest level since June 2012. Crude futures spiked later in the day as the U.S. Department of Labor reported new unemployment claims fell by 24,000 to 334,000, better than analyst expectations. Crude futures rose $1.56 to close at $108.04 per barrel, a 16-month high. The Brent-WTI spread fell to $0.66 per barrel, down from $23.44 per barrel in February.
Natural gas prices
U.S. Henry Hub natural gas futures traded sideways most of the week before rising sharply on Thursday. Prices rose over 5% as the EIA reported a lower-than-expected weekly injection in natural gas storage. Current inventory levels are still 1% below the five-year average and 13% below last year’s level.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, Henry Hub natural gas futures closed up modestly as traders battled a bearish 82 Bcf increase in natural gas inventories reported by the EIA a day before. Expectations of warmer weather next week, supported by forecasts from the National Weather Service (NWS) and MDA Weather Services, helped push futures up during the day. Baker Hughes reported the gas-directed rig count rose by seven to 362. Natural gas futures for August delivery rose 3.1 cents to close at $3.644 per MMBtu.
- On Monday, futures rose during a seesaw trading session driven by weather forecasts. Futures fell early in the day as revised weather forecasts from the NWS showed below-average temperatures for central and eastern United States in the 6–10 day forecast, with above-average temperatures only in the west and southwest. The 8–14 day forecast showed above-average temperatures retreating, which is bearish for natural gas demand. Later in the day, futures rose on speculation that this week’s warm weather will boost natural gas demand and limit next week’s expected net injection of gas in storage. Henry Hub futures closed up 3 cents at $3.674 per MMBtu.
- On Tuesday, natural gas futures remained nearly unchanged as investors noted higher demand in the Northeast due to increased air conditioning in response to the current heat wave. However, investors balanced current demand with forecasts from the NWS showing the warm trend moderating in the 6–10 and 8–14 day forecasts. Natural gas futures closed up 0.3 cents at $3.677 per MMBtu.
- On Wednesday, natural gas futures fell as investors focused on predictions of milder weather in the upcoming forecast periods. Traders also closed long positions ahead of Thursday’s release of EIA’s natural gas storage report, in which investors expected to see an injection well above last year’s 29 Bcf injection during the same week. The EIA projects a large natural gas working inventory of 3,809 Bcf at the end of the injection season, another bearish market signal. Natural gas futures closed down 4.8 cents at $3.629 per MMBtu.
- On Thursday, natural gas futures made strong gains as the EIA reported a 58 Bcf injection, which was below analyst expectations of 64 Bcf. The net injection was the first in seven weeks to fall below the five-year average injection, currently at 70 Bcf. Natural gas inventories are currently 13% below last year’s level and just 1% below the five-year average. Natural gas futures rose nearly 11 cents (3%) following the release of the EIA report. Henry Hub natural gas futures closed for the day at $3.812 per MMBtu, up 18.3 cents.
The forward curve for WTI crude futures is in backwardation where March 2014 WTI futures are 8% lower than current prices due to growing North American supply and weak demand growth in major economies globally. However, March 2014 natural gas futures are at a premium of 7% to near-month (August) futures due to moderating supply growth and increased demand from commercial and residential sectors.
Data source: Factset
Weekly U.S. crude oil and natural gas data
|Indicators||This Period||Prior Period||% Change|
|Refinery Inputs (MMBPD)||16.24||16.12||0.74%|
|Gasoline Demand (MMBPD)||8.73||9.3||-6.13%|
|Distillate Demand (MMBPD)||3.82||3.84||-0.52%|
|Stocks (million barrels)||367.0||373.9||-1.85%|
|Rotary Rig Count||1,391||1,395||-0.29%|
|Indicators||This Period||Prior Period||% Change|
|Working Storage (Bcf)||2,745||2,687||2.16%|
|Rotary Rig Count||362||355||1.97%|
|Horizontal Rig Count||1,058||1,068||-0.94%|
|Consumption (Bcf)*||1,946 (Apr 13)||2,508 (Mar 13)||-22.43%|
|Gross Withdrawals (Bcf)*||2,481 (Apr 13)||2,548 (Mar 13)||-2.64%|
|Canadian Imports (Bcf)*||215 (Apr 13)||240 (Mar 13)||-10.61%|
|LNG Imports (Bcf)*||5.2 (Apr 13)||8.3 (Mar 13)||-37.64%|
* The EIA does not provide weekly natural gas consumption, withdrawal, and import numbers. Thus, the latest available monthly numbers are reported above.
NC – No Change;
Data source: U.S. Energy Information Administration (EIA)
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