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Weekly Oil & Gas Market Highlights: April 4, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures (August) April 4, 2013 March 28, 2012 % Change
Oil – WTI
(USD per barrel)
$93.26 $97.23 -4.1%
Oil – Brent
(USD per barrel)
$106.34 $97.23 -3.3%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$3.95 $4.02 -1.9%

Data sources: Bloomberg; CME Group

Crude oil prices

WTI crude oil futures fell over 4% this week, primarily due to weak employment and crude inventory data from the U.S. The fall was also supported by news about a leak in the Pegasus pipeline and weak economic data from the U.S. and China.

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

  1. Last Friday, U.S. markets were closed for the Good Friday holiday.
  2. On Monday, crude futures fell during Asian trading on profit-taking after a 5.2% increase in futures over the past five sessions. Futures were also pressured by news that China’s official Purchasing Manager’s Index (PMI) missed analyst expectations despite rising 0.8 to 50.9 in March. Later in the day, the U.S. PMI also disappointed analyst expectations as it fell to 51.3 in March from 54.2 in February. News of an oil spill of 3,500–5,000 barrels in Arkansas on the 95,000 bbl/d Pegasus pipeline also put downward pressure on WTI futures as analysts expected the temporary closure of the line would lead to further increases in U.S. crude inventories. Brent futures, however, rose on the news on expectations that refineries would replace the missing volumes with imports until the pipeline reopens. Crude futures closed for the day at $97.07 per barrel, down $0.16.
  3. On Tuesday, crude futures rose along with equities as the Department of Commerce reported that U.S. factory orders increased 3% in February, up from a revised 1% decline in January. Demand for durable goods also rose, increasing 5.6% in February. However, futures fell later in the day as investors grew concerned that the Energy Information Administration’s (EIA) weekly oil data would show a bearish rise in crude inventories as domestic crude production continued to rise and the Pegasus pipeline remained closed for repairs. The pipeline operator is currently developing a plan to repair the line, which runs from Patoka, IL, to Nederland, TX. WTI crude futures for May delivery ended a seesaw session settling up 12 cents at $97.19 per barrel.
  4. On Wednesday, crude futures fell during Asian trading as investors stayed on the sidelines ahead of EIA’s weekly oil stock report expected later in the day. Libya’s deputy oil minister said that the country planned to increase production by 0.2 MMbbl/d in 2013 to 1.7 MMbbl/d. In Nigeria, the Movement for the Emancipation of the Niger Delta announced that it is planning attacks on Nigeria’s oil industry in order to force the release of its leader Henry Okah, currently imprisoned in South Africa. Later in the day, crude futures tumbled nearly 2% as the EIA reported that U.S. crude stockpiles rose 2.7 MMbbl to 388.6 MMbbl, well above analyst estimates and the highest level since July 1990. Gasoline stocks fell by 0.6 MMbbl, while middle distillates declined 2.3 MMbbl. Crude futures closed at $94.45 per barrel, down $2.74.
  5. Crude futures traded in a narrow band just below $94.50 per barrel during Asian trading on Thursday. The Bank of Japan announced that it planned to pump $1.4 trillion into its domestic economy in order to spur economic growth. The news sent the dollar rising rapidly versus the yen and crude futures down, since dollar-denominated oil would be more costly in Japan, the world’s third-largest oil importer. Futures tumbled over 2% during New York trading as the Department of Labor announced that new claims for unemployment benefits rose by 28,000 last week to 385,000, well above analyst estimates. The figures increased concern that the U.S. economy is still struggling to recover, which could weaken demand and boost oil stockpiles. Prices have fallen nearly 5% over the past two sessions of trading. Crude futures closed for the day at $93.26 per barrel, down $1.19.

Natural gas prices

U.S. Henry Hub natural gas futures fell from the $4 per MMBtu mark, on expectations of milder spring weather. However, strong withdrawals from natural gas inventory partially supported the prices.

Closing price; December futures expired on November 28.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg

  1. Last Friday, U.S. markets were closed for the Good Friday holiday.
  2. On Monday, natural gas futures ended down slightly, driven by forecasts of warmer temperatures later in the week. The National Weather Service’s (NWS) 6–10 day forecast showed above-average temperatures across the east and portions of the northwest, with below-average temperatures concentrated only around southern California and Arizona. The 8–14 day forecast showed the warm trend holding and the area of below-average temperatures growing smaller. Open interest continued at record-highs, above 1.4 million contracts. Baker Hughes’ gas-directed rig count fell by 29 units to 389, the lowest since May 1999. Henry Hub natural gas futures closed down 0.9 cents at $4.015 per MMBtu.
  3. On Tuesday, natural gas futures fell as forecasts for warmer temperatures weighed on investor sentiment. The onset of milder spring weather is expected to reduce heating demand ahead of the summer cooling season. However, expectations of a bullish storage draw, when injections are typical for this time of year, helped keep a floor under prices. Futures closed down 4.6 cents (1.1%) at $3.969 per MMBtu.
  4. Natural gas futures fell for the fourth straight day on Wednesday as forecasts of above-average temperatures persisted. Coal-fired generation has also increased as natural gas is less economic at current prices than coal. However, additional upside may come from a strong storage draw this week due to heating demand, which would also alleviate concerns about gas storage levels currently above the five-year average. Futures closed down 6.9 cents (1.7%) at $3.90 per MMBtu.
  5. Natural gas futures rose on Thursday, but seesawed briefly following EIA’s release of its weekly natural gas inventory report, which showed a strong storage withdrawal of 94 Bcf last week driven by cold temperatures. The draw was above analyst expectations during a period when modest gas injections typically begin ahead of the summer cooling season.  At 1,687 Bcf, natural gas in storage is 32% below last year’s high. It is also 2% below the five-year average, falling below the benchmark for the first time in nearly two years At 1,687 Bcf, natural gas in storage is 32% below last year’s high. It is also 2% below the five-year average, falling below the benchmark for the first time in nearly two years. Natural gas futures closed at $3.947 per MMBtu, up 4.7 cents.

Futures curve

December 2013 WTI futures are 0.5% lower than current prices due to growing North American supply and weak demand growth in the U.S. However, the December 2013 natural gas futures are at a premium of 8.8% to near-month (May) 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

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 15.01 14.87 0.94%
Gasoline Demand (MMBPD) 8.52 8.39 1.55%
Distillate Demand (MMBPD) 3.88 4.22 -8.06%
Production (MMBPD) 7.15 7.15 0.00%
Imports (MMBPD) 7.93 8.15 -2.70%
Stocks (million barrels) 388.6 385.9 0.70%
Rotary Rig Count 1,354 1,324 2.27%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 1,687 1,781 -5.28%
Rotary Rig Count 389 418 -6.94%
Horizontal Rig Count 1,099 1,100 -0.09%
Consumption (Bcf)* 2,863 (Jan 13) 2,472 (Dec 12) 15.82%
Gross Withdrawals (Bcf)* 2,542 (Jan 13) 2,562 (Dec 12) -0.78%
Canadian Imports (Bcf)* 262.3 (Jan 13) 234 (Dec 12) 12.09%
LNG Imports (Bcf)* 13.5 (Jan 13) 16.8 (Dec 12) -19.64%

* 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)

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