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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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May 08, 2014:

Crude oil:

  • Last Friday, crude futures rose as Ukraine launched a large-scale offensive against pro-Russian separatists in the region. Meanwhile, German Chancellor Angela Merkel visited the White House to discuss further sanctions. Her government is under pressure from German industries to avoid additional sanctions against Russia. Crude futures also received support later in the day as the U.S. Department of Labor reported the country added 288,000 jobs in April, which were 73,000 more than expected. A growing economy, as reflected in the job numbers, is bullish for crude demand as more workers are expected to increase demand. WTI crude futures closed up $0.34 at $99.76 per barrel.
  • On Monday, crude futures fell as HSBC released its purchasing manager's index (PMI) for China. The data showed the PMI remained nearly flat, rising to just 48.1 in April from 48.0 in March. The weak demand indicator from the world's second-largest oil-consuming nation hurt the crude prices later in the day. Over the weekend, the conflict in Ukraine escalated as government forces entered six eastern cities to try to restore order. On Monday, during early trading, crude prices strengthened as fighting erupted between Ukrainian forces and 800 pro-Russian separatists. The rebels had stormed a police station in Odessa to free their men who were arrested a few days earlier. The fighting resulted in over 40 deaths. Despite these developments, energy analysts continue to view energy-related sanctions against Russia as a remote possibility. WTI crude for June delivery fell $0.28 to close at $99.48 per barrel.
  • On Tuesday, crude futures rose as Markit's composite PMI for the Eurozone countries rose to 54 in April from 53.1 in March. The news strengthened the euro versus the dollar, which is bullish for crude. The Eurozone is also home to several top oil-consuming nations. Later in the day, crude fell as the OECD announced it is marginally lowering its world GDP growth estimate for this year to 2.2% from the 2.3% reported last November. During New York trading, analyst expectations this week's oil data from the Energy Information Administration (EIA) would show a bearish rise in crude futures weighed on the market. Current crude inventories last reported by the EIA stood at 399.4 MMbbl, the highest level since 1931. However, the bearish trend was offset by a note from Morgan Stanley which estimated inventories at Cushing would move close to 20 MMbbl, the minimum operating inventory level, by the end of May. Stockpiles at the WTI pricing hub had tumbled nearly 40% since January to 25.4 MMbbl for the week ended April 25. WTI crude futures closed up $0.02 cents at $99.50 per barrel.
  • On Wednesday, crude futures rose as the main airport in eastern Ukraine was closed following heavy fighting around the facility, which left 30 separatists dead. Unrest in the region has spread to the city of Odessa, Ukraine's third-largest city, where a building fire killed several people. Crude futures continued to rise during New York trading as the EIA reported U.S. crude inventories fell by 1.8 MMbbl to 397.6 MMbbl last week. Analysts had been expecting an increase in U.S. crude stocks. Refinery utilizations fell 0.8% to 90.2%. However, utilizations are at their highest level since 2006 for this time of year, driven largely by strong export demand. Crude stockpiles at Cushing fell 1.4 MMbbl to 24 MMbbl, the lowest level since 2008. Analysts believe supplies at Cushing are approaching the minimum levels needed for operations at the pricing hub. Gulf Coast supplies, which have been rising since the opening of the southern leg of the Keystone pipeline, fell by 1.9 MMbbl last week. WTI crude futures for June delivery closed up $1.27 at $100.77 per barrel.
  • On Thursday, crude futures rose initially as Russian President Vladimir Putin said the country is conducting military exercises to test the combat readiness of its army. Earlier, Putin had pledged to remove his troops from Ukraine's border, but NATO said so far there is no sign of withdrawal from the border region. Crude futures fell later in the day as European Central Bank President Mario Draghi announced the bank maintained Eurozone interest rates at a record low of 0.25% during its meeting in Brussels. Draghi, however, raised the possibility that more stimulative measures could be enacted in order to increase the pace of recovery in Europe. News of a possible stimulus sent the euro falling versus the dollar, which is bearish for dollar-denominated crude. WTI crude futures closed for the day at $100.26 per barrel, down $0.51.

Natural gas:

  • Last Friday, natural gas futures fell as investors gained confidence that producers will be able to refill natural gas inventories, currently at an 11-year low of 1,965 Bcf, before the beginning of this year's heating season. Optimism was driven by the previous day's announcement from the EIA showing an 82 Bcf injection in gas storage. However, analysts estimate about 2–2.5 Tcf of natural gas needs to be injected in order to reach adequate levels to satisfy the heating demand this winter. Henry Hub natural gas futures closed down 4.5 cents at $4.674 per MMBtu.
  • Natural gas futures rose on Monday as revised weather forecasts from the National Weather Service called for below-average temperatures across most of the country except the southeast and the West Coast. Current mild seasonal temperatures and forecasts of below-average temperatures across much of the country are expected to help maintain heating demand in some portions of the country, which is bullish for natural gas. Some investors are concerned lingering cool temperatures could contribute to a return to the trend of below-average injections, which raises concerns about refilling the inventory levels. Henry Hub natural gas futures closed up 1.4 cents at $4.688 per MMBtu.
  • On Tuesday, natural gas futures extended Monday's gains as weather forecasts continued to support expectations of increased demand for both heating and cooling in different parts of the country. In EIA's natural gas report released last week, the data showed natural gas demand up 0.4% week on week. Lingering heating demand in portions of the country and a stronger-than-expected demand for cooling in others are expected to cut into this week's natural gas injection. Henry Hub natural gas futures closed up 11.1 cents at $4.799 per MMBtu.
  • On Wednesday, natural gas futures fell on profit-taking following two days of increases driven by expectations of above-average demand. Some investors believe contracts have been overbid, as analysts expect this week's natural gas inventory figures may come in near the closely watched five-year average level. Henry Hub natural gas futures closed down 5.9 cents at $4.740 per MMBtu.
  • On Thursday, natural gas futures plunged as the EIA released its weekly natural gas data, which showed U.S. natural gas inventories rising 74 Bcf last week to 1,055 Bcf. The injection compared bullishly with the five-year average injection of 72 Bcf, which the market was watching closely. However, the injection was bearish versus last year's injection of 81 Bcf during the same reporting period. Henry Hub natural gas futures closed down 16.80 cents at $4.572 per MMbtu.

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