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Weekly Oil & Gas Market Highlights: April 26, 2012

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators for the prior seven days

Crude oil, USD per bbl Noon (EDT) on Thursday, 4/26/12 Noon (EDT) on Thursday, 4/19/12
Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures $104.64 (June-2012 Contract) $102.81 (June-2012 Contract)
WTI Cushing Spot $104.65 $102.41
Dated Brent Spot $119.80 $117.83
Natural gas, USD per MMBtu Noon (EDT) on Thursday, 4/26/12 Noon (EDT) on Thursday, 4/19/12
Front-Month NYMEX Henry Hub Futures $2.10 (June-2012 Contract) $1.91 (June-2012 Contract)
Henry Hub Spot $2.00 $1.88

Data sources: Bloomberg; CME Group

Oil & Gas highlights

  • NYMEX WTI crude futures for June ended the week up buoyed by positive economic indicators and anticipation of the Seaway pipeline reversal.
  • Last Friday, WTI crude futures rose with the broader market on a strengthening euro.  The market responded positively to news of economic growth in the European Union.  Germany’s Ifo Institute, which provides a monthly report tracking business confidence, showed that business confidence in Germany rose from 109.8 in March to 109.9 in April.  Crude futures also got a boost when the UK Office for National Statistics released retail sales figures for March showing a 1.8% increase, the highest rise in over a year, compared to just 0.8% in February.  However, the report noted that wage growth was just 1.4%, which highlights an erosion of consumer spending power.  NYMEX WTI crude futures for June delivery closed out the week at $103.88 per barrel.
  • On Monday, crude futures fell in Asia on bearish fundamentals even as HSBC’s preliminary Purchasing Managers Index (PMI) report showed a slight rise from 48.3 in March to 49.1 according to the data.  However, a number below 50 still indicates contraction.  Oil continued to fall on Monday as bearish economic news dominated in Europe.  Germany’s PMI fell to a near three year low of 46.3 in April. France’s PMI was also bearish.  Further creating uncertainty was Sarkozy’s poor performance in the first round of Presidential elections.  Analysts fear that if Sarkozy is not reelected, his successors may reassess France’s support for the euro-zone rescue package, which could bring the euro-debt crisis back to the fore in the oil futures market.  Also, the Dutch government was unable to reach agreement on cutting the government’s budget deficit, which would put the country’s current triple-A rating at risk.
  • Futures trended upward Tuesday as a result of technical analysts trading in the market to test resistance at $104 per barrel.  Futures prices passed the $104 per barrel mark before falling again.  Trading was fairly modest as market participants awaited Wednesday’s oil stocks data from the Energy Information Administration (EIA).  The Brent/WTI price spread fell below $15 during trading driven by anticipation of the Seaway pipeline reversal set for May 17.  The reversed pipeline should bring 100,000 bbl/d to the Gulf region and help draw down the mounting crude stocks at Cushing, OK.  The American Petroleum Institute reported that crude stocks declined 985,000 barrels last week, which highlights strengthening crude demand.
  • On Wednesday, crude futures rose ahead of EIA’s release of its weekly oil stocks data on expectations that the report would show a more modest build in inventories.  However, such hopes were dashed when EIA reported that crude stocks rose 4 million barrels last week to 373 million barrels.  At Cushing stocks rose 600,000 barrels to 41.8 million barrels, just below the record set spring of 2011, as companies position their crude to take advantage of the impending Seaway reversal.  Gasoline stockpiles fell 2.2 million barrels last week as refinery utilization edged up slightly to 84.7% of capacity.  Futures began to climb again as the Federal Reserve’s Open Market Committee re-affirmed that interest rates would be kept low for at least two years, which is bullish for commodities that are not tied to the interest rate.
  • On Thursday, WTI oil futures fell 0.3% on disappointing jobs news from the U.S. Department of Labor.  New jobless claims fell by only 1,000 to 388,000 below analyst expectations.  Later in the day, futures prices began rising as the National Association of Realtors announced that pending home purchases were up 4.1% to 101.4, the highest level in two years.  The news sent both the broader stock market and the oil futures market rising.  Further supporting the rise was a weakening dollar.
    • The EIA reported NYMEX crude futures prices closed up $0.22 last week at $103.05.  Crude stocks continued recent large builds rising by 4.0 MMbbl to 373 million barrels.  Stocks are 9.9 million barrels higher than a year ago.
    • The average retail gasoline price fell $0.052 last week to $3.87 a gallon.  Prices were down $0.009 over last year.  Gasoline stocks fell 2.2 MMbbl to 211.7 million barrels, which is up 6.1 MMbbl from the same time last year.
    • The average retail diesel price fell $0.042 to $4.085 a gallon.
    • Distillate stocks were down by 3.1 million barrels to 125.9 million barrels and down 20.6 million barrels year on year.

Natural Gas highlights

  • The EIA reported Henry Hub spot prices rose last week by 12 cents to $1.99 per MMBtu after spending the entire week below $2/MMBtu.  The NYMEX gas futures price was up 11.7 cents to $2.068 per MMBtu from $1.951 last week.  Temperatures were 4.1 degrees above the 30-year average and up 3.7 degrees over last year.
  • Domestic natural gas production was up slightly by 0.3% driven by an increase in dry gas production.  Gas production is up 4.1% year on year.  U.S. gas imports from Canada stayed flat, but were down 8.4% from last year.  The natural gas rotary rig count rose by 7 rigs to 631.  Oil-directed rigs were up by 15 to 1,337.
  • Working natural gas in storage was up 47 Bcf to 2,548 Bcf, which is 872 Bcf higher than a year ago and 908 (55%) higher than the 5-year average.
  • Domestic natural gas consumption fell 1.1% percent from the previous week with the power sector falling 5.5%.  Demand from the residential/commercial sector was up 1.6% and industrial sector demand was up 1.4%.

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Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions have developed an assessment of the potential economic impact of LNG exports from the United States based upon various assumptions. Made in America: The Economic Impact of LNG Exports from the United States summarizes the findings of alternative scenarios regarding U.S. LNG exports and offers related strategic insights.

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