Weekly Oil & Gas Market Highlights: June 14, 2012
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators for the prior seven days
|Crude oil, USD per bbl||Noon (EDT) on Thursday, 6/14/12||Noon (EDT) on Thursday, 6/7/12|
|Front-Month NYMEX Light, Sweet Crude Oil (“WTI”) Futures||$83.30 (July-2012 Contract)||$85.05 (July-2012 Contract)|
|WTI Cushing Spot||$83.40||$86.40|
|Dated Brent Spot||$96.84||$100.17|
|Natural gas, USD per MMBtu||Noon (EDT) on Thursday, 6/14/12||Noon (EDT) on Thursday, 6/7/12|
|Front-Month NYMEX Henry Hub Futures||$2.39 (July-2012 Contract)||$2.32 (July-2012 Contract)|
|Henry Hub Spot||$2.18||$2.41|
Data sources: Bloomberg; CME Group
Oil & Gas highlights
- NYMEX WTI crude futures for July ended the week up as speculation increased that the U.S. Federal Reserve may decide additional stimulus is needed at its next meeting on June 19 and OPEC announced the organization would leave output unchanged even in the face of falling prices.
- Last Friday, futures extended Thursday’s decline as prices fell in Asian trading on news that Federal Reserve Chairman Bernanke did not state that a third round of quantitative easing (QE3) was imminent. The news overwhelmed positive economic indicators out of China about an interest rate reduction to stimulate the economy and strong 4.7% GDP growth figures out of Japan. U.S. WTI futures fell 2.7% following the Federal Reserve’s announcement. According to the Energy Information Administration (EIA), U.S. crude production is up 11.6% from last year and has crossed 6 MMbbl/d for the first time since 1998. OPEC is producing ~32.5 MMbbl/d, a level not seen since 2008, in order to increase the economic impact of impending oil sanctions on Iran that will officially begin July 1, 2012.
- On Monday, futures prices tumbled throughout the day from ~$86 per barrel to an intraday low under $82.50 a barrel. Futures initially opened higher in Asia as China announced that its May oil imports reached a new record of 6.02 MMbbl/d above the previous record set in February 2012 of 5.98 MMbbl/d. The import figures reversed two months of import declines. Also, boosting initial optimism was news over the weekend that the Spanish government had received ~$125 billion (100 billion euros) in loan guarantees for its bank. However, the bailout was widely anticipated and provided only a temporary boost. Prices plunged as the International Energy Agency (IEA) announced that China will be the major source of world crude demand growth taking 400,000 (50%) of the expected 800,000 bbl/d increase in production expected this year. However, European demand is expected to fall by 300,000 bbl/d and U.S. demand by 200,000 bbl/d. Also, Secretary of State Hillary Clinton announced Iranian oil sanctions exemptions on Monday for several countries including Iran’s primary customers India, South Korea, and Turkey for showing significant progress (over 10% reductions) in their imports of Iranian oil. The U.S. has still not come up with a formula for applying the oil sanctions to China, which accounts for 22% of Iran’s oil exports and is the largest creditor to the U.S.
- On Tuesday, futures prices fell in Asian Globex electronic trading as investors continued to be concerned about the eurodebt crisis and the upcoming Greek elections set for this weekend. Stock prices rose in New York trading as the euro strengthened versus the dollar and the bond market began to reverse. EIA also announced on Tuesday that OPEC production dropped from 31.24 MMbbl/d in April to 30.91 MMbbl/d in May. Given that OPEC had earlier announced the organization believes current global demand for its crude is 30 MMbbl/d, the market reacted to what appeared to be a near-term shortage by bidding up the futures price. OPEC maintains that its output is just under 33 MMbbl/d and the market is well supplied.
- During Wednesday trading, futures prices had a bumpy ride driven by expectations for the upcoming OPEC meeting in Vienna and new EIA data. OPEC Secretary General, Abdalla Salem el-Badri, stated that he saw oversupply in the market indicating that the group may not raise the production caps. Futures prices received a boost on the release of the latest EIA data, which showed that oil stocks declined by 200,000 barrels. Stockpiles of gasoline fell by 1.7 million barrels and middle distillates declined by 100,000 barrels. However, as the afternoon continued futures prices slid on expectations that the OPEC meeting would leave the output quotas unchanged.
- On Thursday, crude futures rose as the Department of Labor reported a disappointing rise in new jobless claims. New unemployment claims rose 6,000 to 386,000 well above analyst expectations. Such a jobless report would usually be expected to have a negative impact on futures prices. However, coming five days before the next meeting of the Federal Open Market Committee on June 19, the disappointing figures increased speculation that the Fed would engage in a new round of stimulus measures, which is bullish for crude prices. Additionally, U.S. consumer confidence figures rose for the fourth week in a row. Further boosting prices was the announcement out of the meeting of OPEC member nations that they would leave the production quota unchanged. This is the first time in 10 years that OPEC has not reduced production in the face of sagging prices. Ahead of the meeting Saudi Arabia and like-minded nations had indicated an interest in order to reduce the risk of demand destruction and to increase the bite of Western sanctions on Iran when they go into effect on July first of this year.
- The EIA reported NYMEX WTI crude futures prices rose $0.87 last week to $84.10 per barrel. Crude stocks fell 200,000 barrels to 384.4 million barrels. Stocks are 18.9 million barrels higher than a year ago.
- The average retail gasoline price fell $0.040 last week to $3.57 a gallon while gasoline stocks fell 1.7 MMbbl to 201.8 million barrels, which is down 13.3 MMbbl from last year.
- The average retail diesel price was down $0.065 to $3.572 per gallon.
- Distillate stocks were down by 100,000 barrels to 120.0 million barrels, down 20.8 million barrels year on year.
Natural Gas highlights
- The EIA reported the Henry Hub spot price was down $0.23 over the past week to close at $2.18 per MMBtu. The NYMEX July 2012 natural gas futures contract fell 23.6 cents to $2.185 per MMBtu. Natural gas prices fell as speculation increased that a warm summer may prove elusive and thus limit the summer demand upside. The average temperature in the lower 48 States was 66.7 degrees, 1.1 degrees below the 30-year average and 5 degrees below last year’s temperature.
- The domestic natural gas supply was up 0.6% last week led by a 6.1 Bcf/d (7.5%) increase in Canadian imports. The natural gas rotary rig count fell by 23 rigs to 565. Oil-directed rigs were up 28 rig to 1,414.
- Working natural gas in storage increased 67 Bcf to 2,944 Bcf, which is up 708 Bcf over last year.
- Domestic natural gas consumption fell by 0.6% over the prior week. The residential and commercial sector demand fell 14% as a result of the cooler temperatures during the heating season and the industrial sector was down 0.9%. The power sector increased demand by 6%.
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