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Weekly Oil & Gas Market Highlights: August 15, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures August 15, 2013 August 08, 2013 % Change
Oil – WTI
(USD per barrel)
$107.33 $103.40 3.8%
Oil – Western Canadian Select*
(USD per barrel)
$85.01 $80.97 5.0%
Oil – Brent
(USD per barrel)
$111.11 $106.68 4.2%
Natural Gas – U.S. Henry Hub
(USD per MMBtu)
$3.42 $3.30 3.7%

Data sources: Bloomberg; CME Group
* Western Canadian Select 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 ~4% this week due to positive economic news from China and political tensions in the Middle East. The unexpected fall in U.S. crude inventory was supportive for crude, while speculation about an impending slowdown in the U.S. bond-buying program put a ceiling over prices.

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

  1. Last Friday, crude futures rose as China's National Bureau of Statistics reported the nation's industrial production rose 9.7% in July, the highest level in five months, from 8.9% in June. Chinese retail sales rose at an annualized 13.2% in July according to the data. The International Energy Agency (IEA) reduced its 2014 forecast for oil demand growth by 100,000 bbl/d to 1.1 MMbbl/d in its monthly Oil Market Report. The IEA forecasts global oil demand will increase by 1.2% in 2014 to a total of 92 MMbbl/d. OPEC, which released its monthly Oil Market Report on the same day, maintained its prediction for 2014 oil demand growth at 1.04 MMbbl/d. OPEC predicts total 2014 demand will be 90.8 MMbbl/d. WTI crude futures closed at $105.97 per barrel, up $2.57.
  2. On Monday, Japan reported its second-quarter GDP growth was 2.6%, which was below analyst expectations.However, crude futures largely traded sideways as traders focused on last week's positive economic news from neighboring China as a stronger indicator of overall crude demand.Later in the day, Libya restarted operations in the El-Feel field as the country begins to resume oil exports from some of the terminals that were closed the prior week due to labor protests and militant activity. However, crude prices rose marginally as the oil export terminal at Es Sider was shut down again after opening for a single day, due to continued labor protests. In Sudan, the government moved back a planned closure of the oil export pipeline from South Sudan by two weeks in order to allow negotiations to continue between the two countries and African Union negotiators. Oil shipments through the pipeline are currently around 160,000 bbl/d. Crude futures rose $0.14 to close at $106.11 per barrel.
  3. On Tuesday, crude futures rose during Asian trading as strikes continued at two of Libya's largest crude exporting terminals. In July, labor strikes, militant activity, and port disruptions in Libya reduced the country's crude production to 800,000 bbl/d, down from 1.6 MMbbl/d a year ago. Crude futures also strengthened as Iraq announced scheduled maintenance at the country's main export hub, which is expected to reduce supplies in September. During New York trading, futures fell as the U.S. Department of Commerce reported that retail sales rose by just 0.2% in July, below analyst expectations. Also putting pressure on prices, Atlanta Federal Reserve President Dennis Lockhart stated the Fed may begin to taper down its bond-buying program during its next few meetings. Lockhart has backed the stimulus measure previously. However, the weakness was not enough to offset earlier gains, and WTI futures closed up $0.72 to settle at $106.83 per barrel.
  4. Crude prices fell during Asian trading on Wednesday as the U.S. dollar strengthened against a basket of currencies on expectations that the Fed would soon begin to cut back its bond-buying program. Further, Libya's oil minister Abdulbari Al-Arusi announced the Mellitah port would reopen in order to resume shipments of oil from the El-Feel field. Futures prices have been supported in recent days by tensions in the Middle East and supply disruptions in Libya. Crude futures rebounded later in the day as the Energy Information Administration (EIA) reported crude stockpiles fell by 2.8 MMbbl last week to 360.5 MMbbl. Analysts had expected a smaller drop in inventories. The EIA also reported China is poised to overtake the U.S. as the world's largest oil importer in October, when U.S. net oil imports are expected to fall to 6.23 MMbbl/d (down from an all-time high of 14.3 MMbbl/d in November 2005) and China's net imports rise to 6.45 MMbbl/d. Crude futures closed up $0.02 at $106.85 per barrel.
  5. On Thursday, crude futures rose over concerns of violence in Egypt as security forces stormed two areas held by protesters, killing over 500 people. The rising violence is increasing concerns about the continued stable operation of the Suez Canal, a key oil chokepoint, and the Suez-Mediterranean pipeline. The canal and pipeline transport a combined 4.5 MMbbl/d of crude. The U.S. Department of Labor reported new jobless claims fell by 15,000 to 320,000, the lowest level since October of 2007. However, crude fell during New York trading as improving economic conditions in the U.S. have increased speculation that the Fed may soon end its bond-buying program, which has been supportive of crude prices. Crude futures closed for the day at $107.33 per barrel, up $0.48.

Natural gas prices

U.S. Henry Hub natural gas futures rose 3.7% this week, boosted by a lower-than-expected build in inventories. Likely disruptions in the supply due to tropical storms in the Gulf region supported the prices, while the bearish demand outlook continues due to persisting mild temperatures in the U.S.

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

  1. Last Friday, Henry Hub natural gas futures fell as temperature predictions from the National Weather Service (NWS) continue to show mild temperatures across much of the country in its 6–10 and 8–14 day forecasts. Moderate temperatures are expected to support above-average natural gas inventory builds over the coming weeks. Baker Hughes reported the gas-directed rig count fell by two rigs to 386. Natural gas futures closed down 6.7 cents at $3.23 per MMBtu.
  2. On Monday, natural gas futures rose as revised weather forecasts from the NWS showed warmer temperatures in the Northeast and Midwest. The warmer temperatures are expected to boost air-conditioning demand. Traders are also keeping an eye on tropical storm activity in the Gulf region for storms that could impact gas production in the Gulf of Mexico during the Atlantic Hurricane season.Natural gas futures closed up 8 cents at $3.31 per MMBtu.
  3. Natural gas futures fell slightly on Tuesday as expectations for warmer temperatures in NWS forecasts were tempered by average to below-average temperatures in Texas and much of the South. The U.S. National Hurricane Center (NHC) said there was a 30% chance an area of low pressure in the Caribbean Sea would develop into a tropical storm. Traders are expecting a bearish build in natural gas inventories this week due to recent mild temperatures in the Northeast. The EIA also expects more record-high natural gas inventories this year. Natural gas futures closed down 2.5 cents at $3.285 per MMBtu.
  4. On Wednesday, natural gas futures rose as NHC upgraded the possibility to 60% the low-pressure wave in the Caribbean would develop into a tropical storm. Computer tracking showed the system heading for the southern region of the Gulf of Mexico, where it could disrupt offshore oil and gas production if the system continues to gain strength. A second low-pressure system in the eastern Atlantic was estimated to have a 70% chance of developing into a tropical storm. Natural gas futures closed up 5.7 cents at $3.342 per MMBtu.
  5. On Thursday, natural gas futures rose as EIA reported natural gas in storage rose by 65 Bcf, which was below analyst expectations, to 3,006 Bcf. However, it was the third week in a row the injection exceeded the five-year average. The NHC said Tropical Storm Erin had formed in the eastern Atlantic, but the trajectory of the storm shows it heading mostly to the North and Northwest, away from the Gulf. Natural gas futures rose 7.7 cents to close at $3.419 per MMBtu.

Futures curve

The forward curve for WTI crude is in backwardation, with March 2014 WTI futures being 6% lower than near-month (September) futures due to growing North American supply and concerns over slowing global economic growth. However, March 2014 natural gas futures are at a premium of 11% over September 2013 futures due to expectations of moderate supply growth and higher demand from commercial and residential sectors in 2013.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 15.61 15.89 -1.76%
Gasoline Demand (MMBPD) 9.19 9.25 -0.65%
Distillate Demand (MMBPD) 3.61 3.87 -6.72%
Production (MMBPD) 7.57 7.56 0.13%
Imports (MMBPD) 7.92 7.91 0.13%
Stocks (million barrels) 360.5 363.3 -0.77%
Rotary Rig Count 1,385 1,388 -0.22%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 3,006 2,941 2.21%
Rotary Rig Count 386 388 -0.52%
Horizontal Rig Count 1,065 1,073 -0.75%
Consumption (Bcf)* 1,740 (May 13) 1,947 (Apr 13) -10.65%
Gross Withdrawals (Bcf)* 2,537 (May 13) 2,485 (Apr 13) 2.09%
Canadian Imports (Bcf)* 229.0 (May 13) 215.1 (Apr 13) 6.48%
LNG Imports (Bcf)* 5.6 (May 13) 5.2 (Apr 13) 8.80%

Notes:
* The EIA does not provide weekly natural gas consumption, withdrawal, and import numbers. Thus, the latest available monthly numbers are reported above.
NC – No Change;
Data source: U.S. Energy Information Administration (EIA)

Comments and questions welcomed. Please contact DeloitteCenterforEnergySolutions@deloitte.com.

Learn more

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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.

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