Weekly Oil & Gas Highlights Library
A weekly snapshot of current market conditions
The O&G weekly updates are issued on a weekly basis, highlighting news from the previous week’s activities in the oil and gas industry. The purpose of these updates is to provide:
- Key oil and gas price indicators for the prior seven days
- Oil market highlights
- Natural gas highlights
- Information about upcoming Deloitte Oil & Gas Events
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Crude oil
- 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.
- 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.
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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.
- 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.
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