This site uses cookies to provide you with a more responsive and personalized service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print this page

Weekly Oil & Gas Market Highlights: February 20, 2014

Deloitte Center for Energy Solutions publication

Subscribe to the weekly Oil & Gas Market Highlights Memo Sign up to receive the weekly Oil & Gas Market Highlights Memo

Key Oil & Gas price indicators

Front Month Futures February 20,
2014
February 13,
2014
% Change
Oil – WTI
(USD per barrel)
$102.92 $100.35 2.6%
Oil – Western Canadian Select*
(USD per barrel)
$79.17 $75.35 5.1%
Oil – Brent
(USD per barrel)
$110.30 $108.73 1.4%
Natural Gas – U.S. Henry Hub
(USD per MMBtu)
$6.06 $5.22 16.1%

Data sources: Bloomberg; CME Group
* Western Canadian Select (WCS) 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 2.6% this week as cold weather across the U.S. drove heating oil demand. Weak economic data from China marginally lowered the prices while falling crude stockpiles at Cushing benefitted WTI futures.

Daily closing price
Note: Intra-day prices (every 6 hours); March month futures expired on February 20, 2014
Data source: Bloomberg

  1. Last Friday, crude futures rose marginally during London trading as the Libyan Ministry of Oil announced production at the El Sharara oil field fell to 0.20 MMbbl/d from 0.35 MMbbl/d as protestors shut down a pipeline to the Zawiya oil export terminal. During New York trading, futures rose as the Federal Reserve released data showing U.S. manufacturing output fell 0.8% in January. The falling indicator increased speculation the Fed may choose to slow the tapering of its bond buying program, which has been bullish for crude prices. However, futures reversed course and fell later in the day as investors noted U.S. refineries were entering turnaround season, which would temporarily slow demand. WTI crude futures for March delivery fell $0.05 cents to close at $100.30 per barrel.
  2. On Monday, trading was closed due to the President’s Day holiday in the United States.
  3. On Tuesday, crude futures rose as a second snowstorm in three days in the U.S. boosted petroleum-derived fuel demand. Below-average temperatures across the Midwest and eastern part of the country have led to surging demand for heating fuels such as natural gas and heating oil. Middle distillate inventories, which include heating oil, are 22% lower than the average for this time of year. Crude futures were also up on expectations that crude stockpiles at Cushing would see another large draw this week when the Energy Information Administration (EIA) released its weekly petroleum data. The southern portion of the Keystone XL pipeline began moving 288,000 bbl/d of oil from Cushing to Gulf Coast refiners in late January and will ramp up to 0.70 MMbbl/d by the end of 2014. WTI crude futures for March delivery closed up $2.13 at $102.43 per barrel.
  4. On Wednesday, crude futures extended Tuesday’s gain as the American Petroleum Institute released data predicting a 1.82 MMbbl/d drop in crude inventories at Cushing. The news sent crude to a four-month high narrowing the Brent premium over WTI to $7.63 per barrel, the narrowest spread since early October 2013. Futures also gained as street demonstrations in Venezuela protesting President Nicolas Maduro’s rule continued into the second week. Opposition leader, Leopoldo Lopez, who narrowly lost last year’s presidential election, was forced into a police vehicle while speaking to supporters. Venezuela has the world’s largest proved crude oil reserves at 297.57 billion barrels according to EIA’s 2013 data. WTI crude futures closed up $0.88 at $103.31 per barrel.
  5. On Thursday, crude futures fell as the preliminary reading of China’s Purchasing Manager’s Index fell to 48.3 in February from 49.5 in January. The declining indicator raised concerns over oil demand from the world’s second-largest oil consumer. Futures reversed course later in the day, partially erasing earlier losses as the EIA released its weekly petroleum data, which showed crude inventories at the key pricing hub Cushing, OK, falling to 35.9 MMbbl. Stocks at Cushing have fallen 5.96 MMbbl over the past three weeks as the southern leg of the Keystone pipeline has begun moving crude from Cushing to Gulf Coast refiners. The increase in WTI squeezed another $0.10 from the Brent premium, which narrowed to $7.53 per barrel. Total crude stocks in the U.S. rose 973,000 barrels, according to the EIA data. WTI crude futures for March delivery fell $0.39 to expire at $102.92 per barrel. 

Natural gas prices

Henry Hub natural gas rose over 16% this week, crossing the $6 mark in over five years, driven by the series of cold snaps this winter and the expectation of below-average temperatures in March. U.S. natural gas inventories fell to the lowest level for this time of the year in nearly 10 years.

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

  1. Last Friday, natural gas futures rose as high as $5.389 per MMBtu in early trading as investors looked at EIA’s data showing gas inventories at their lowest levels since 2004 despite rising output from shale deposits. However, futures reversed course later in the day as revised weather forecasts from the National Weather Service showed above-average temperatures covering most of the eastern half of the country in the 6–10 day forecast. Henry Hub natural gas futures closed down 0.9 cents at $5.214 per MMBtu.
  2. On Monday, trading was closed due to the President’s Day holiday in the United States.
  3. On Tuesday, Henry Hub futures rose to a three-week high as snowstorms and cold weather boosted heating demand. Continued cold weather in the Midwest and eastern part of the country have boosted natural gas-derived heating demand, which has reduced natural gas inventories to the lowest levels in 10 years. Henry Hub natural gas futures closed up 33.7 cents to $5.551 per MMBtu.
  4. On Wednesday, natural gas futures surged past the $6 per MMBtu mark, the highest level in over five years, driven by continuing cold weather that can potentially cut into natural gas inventories, leaving them in a weak position to meet power demand for summer cooling. Investors are predicting end-of-winter-season (March) gas storage levels below 900 Bcf, which will require an average injection of 94 Bcf per week to refill inventories to 3,800 Bcf by November. The rally was largely confined to the front-month March contract, which closed $1.20 over the April contract, up from an 80 cent spread the day before. Henry Hub natural gas futures closed up 59.8 cents at $6.149 per MMBtu.
  5. On Thursday, natural gas futures fell as the EIA released its weekly natural gas inventory report. The data showed a 250 Bcf drop in natural gas inventories, which declined to 1,443 Bcf. However, the fall was below market expectations that had largely been priced in the day before, sending futures falling. Current inventories are still 40% below last year’s level and 34% below the five-year average. Henry Hub natural gas futures closed for the day at $6.064 per MMBtu, down 8.5 cents.

Futures curve

The forward curve for WTI crude is in backwardation, with September 2014 WTI futures 5% lower than near-month (March) futures due to rising North American crude supplies. The EIA expects U.S. crude production to average 8.54 MMbbl/d in 2014 — the highest since 1986 — boosted by increased drilling in tight oil plays. While the snowstorms and colder-than-average winter weather drove near-term (March) natural gas prices higher, the expectation of moderate seasonal demand and growing U.S. supply in 2014 weighed on September futures.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 15.18 15.22 -0.26%
Gasoline Demand (MMBPD) 8.03 8.33 -3.60%
Distillate Demand (MMBPD) 3.62 3.68 -1.63%
Production (MMBPD) 8.15 8.13 0.25%
Imports (MMBPD) 7.42 7.93 -6.43%
Stocks (million barrels) 362.3 361.4 0.25%
Rotary Rig Count 1,423 1,416 0.49%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 1,443 1,686 -14.41%
Rotary Rig Count 337 351 -3.99%
Horizontal Rig Count 1,183 1,176 0.60%
Consumption (Bcf)* 2,301 (Nov 13) 1,861 (Oct 13) 23.64%
Gross Withdrawals (Bcf)* 2,558 (Nov 13) 2,580 (Oct 13) -0.85%
Canadian Imports (Bcf)* 205.2 (Nov 13) 214.7 (Oct 13) -4.42%
LNG Imports (Bcf)* 2.7 (Nov 13) 5.6 (Oct 13) -51.79%

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

New reports from the Deloitte Center for Energy Solutions

The U.S. oil and gas industry is experiencing unprecedented success. But this success brings numerous challenges that will need to be addressed in the short term. To help practitioners better understand the way forward, the Deloitte Center for Energy Solutions has produced three distinct reports exploring some of the more critical issues facing the industry – people, infrastructure and capital projects.

 Oil & Gas Mergers and Acquisitions Report – Year-end 2013: The deal market quiets down addresses the drop in merger and acquisition activity in 2013.

 2013 Deloitte Oil & Gas Conference – Presentations includes a handful of presentations from their respective speakers, addressing the conference theme, Capitalizing on Success.

 Forward look: Top Regulatory trends for 2014 in energy addresses the shifts in the regulatory landscape for U.S. energy companies this year.

 2014 Outlook on oil and gas – My take: By John England outlines several challenges facing the sector this year, as viewed by John England, U.S. Oil & Gas Leader, Deloitte LLP.

 The challenge of renaissance: Managing an unprecedented wave of oil and gas investment reveals the insights of Deloitte Capital Projects specialists on the variety and magnitude of oil and gas megaproject investments and addresses associated challenges and opportunities.

 The rise of the midstream: Shale reinvigorates midstream growth provides insights on the midstream sector’s path from growth boom to maturity over the next two decades, ultimately leading to the rise of the midstream major.

 Oil and gas talent management powered by analytics: Adopting analytics to effectively manage workforce needs explores how leading HR organizations within the oil and gas industry are starting to effectively use data analytics to help identify, recruit, retain and develop skilled talent.

Save the Date!

May 13–14, 2014
Deloitte Energy Conference — Washington, DC
For more information or to obtain a synopsis of the 2013 Deloitte Energy Conference, please contact EnergyConference@deloitte.com

November 18, 2014
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. 
www.deloitte.com/energysolutions.

As used in this document, ‘Deloitte’ means Deloitte LLP (and its subsidiaries). Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Share this page

Email this Send to LinkedIn Send to Facebook Tweet this More sharing options

Stay connected