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: September 26, 2013

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 September 26, 2013 September 19, 2013 % Change
Oil – WTI
(USD per barrel)
$103.03 $106.39 -3.2%
Oil – Western Canadian Select*
(USD per barrel)
$71.03 $80.14 -11.4%
Oil – Brent
(USD per barrel)
$109.21 $108.76 0.4%
Natural Gas – U.S. Henry Hub
(USD per MMBtu)
$3.50 $3.72 -6.0%

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 fell over 3% this week primarily due to easing political tensions in the Gulf region and rising African supply. While a rise in U.S. crude inventories aggravated the fall, positive employment data supported the prices.

Closing price
Note: Intra-day prices (every 6 hours); October month futures expired on September 20, 2013;
Data source: Bloomberg

  1. Last Friday, crude futures fell sharply on news of increased supply in Libya and Iraq. In Libya, the Director of Measurement at the Ministry of Oil reported the country’s output was expected to rise to 0.80 MMbbl/d as labor disputes are resolved and port closures are lifted. Libyan production had fallen as low 0.15 MMbbl/d in September from a high of 1.4 MMbbl/d in April, due to labor strikes. Iraq's oil ministry officials also reported crude oil production capacity is currently on target to exceed 3.6 MMbbl/d by the end of 2013. Easing geopolitical tensions in the Middle East put further downward pressure on prices. The Organization for the Prohibition of Chemical Weapons began reviewing Syria's initial disclosure report on its chemical weapons stockpiles. Also helping to ease tensions, Iranian President Hassan Rohani stated in an interview that his country will never seek nuclear arms — a major source of tension between Iran and the West. Current Western-backed oil sanctions against Iran have pushed the country from second to sixth position on OPEC's top crude producers list. WTI crude futures for October delivery expired at $104.67 per barrel, down $1.72 on the NYMEX. The November contract, which moved to the front-month position, fell $1.11 to $104.75 per barrel.
  2. On Monday, crude futures rose during Asian trading as HSBC released its preliminary reading of China's Purchasing Managers' Index, which showed a rise to from 50.1 in August to 51.2 in September. The increase was above analyst expectations. However, futures fell later during the day as oil flows resumed at three trunk lines in Nigeria, which were shut down due to sabotage and theft. The Nigerian National Petroleum Corporation said the country’s current daily production was 2.4 MMbbl/d, up from 2.2 MMbbl/d in the first quarter of 2013. WTI for November delivery fell $1.16 to close at $103.59 per barrel.
  3. On Tuesday, futures extended Monday’s losses as traders saw the possibility of a meeting between President Barack Obama and Iranian President Hassan Rouhani when the two leaders were to visit the U.N. General Assembly later in the day. Such a meeting would signal an easing of tensions in the Gulf region. In his remarks, President Barack Obama cited the recent overtures by Iran as a basis for "meaningful agreement" to resolve the confrontation between the West and the Gulf nation over its nuclear program. However, later in the day, White House officials rejected any possibility of a meeting between President Obama and his Iranian counterpart during the U.N. visit. On the supply side, the Energy Information Administration (EIA) released data showing production from Eagle Ford in Texas helped boost total production from the state to 2.58 MMbbl/d in June - the highest level since May 1981. Production was up 613,000 bbl/d, nearly 25%, from June 2012. WTI crude futures closed down $0.46 at $103.13 per barrel.
  4. On Wednesday, crude futures rose ahead of EIA’s release of inventory data as analysts expected a fall in crude stockpiles. However, futures fell as EIA’s weekly oil stocks report showed crude inventories rising by 2.64 MMbbl to 358.3 MMbbl. Driving the rise in stockpiles, total petroleum demand fell 2.8% to 19.3 MMbbl/d and refineries reduced their utilization rate to 90.3%, the lowest level since the beginning of August. Also exerting downward pressure on prices, the broader S&P 500 index moved down as the Senate voted unanimously to advance a bill to fund federal government operations. However, the Senate plans to change the language in the House Bill to ensure funding continues for the President's signature 2010 Patient Protection and Affordable Care Act, commonly known as "Obamacare," before sending the bill back to the House. Unless the two chambers reach a joint resolution, the government could face a temporary shutdown until the House and Senate agree to allocate funds to continue government operations. WTI crude fell for the fifth day to close at $102.66 per barrel, down $0.40.
  5. On Thursday, crude futures fell during early trading as U.S. Secretary of State John Kerry planned to meet Iranian Foreign Minister Javad Zarif in the highest-level talks between the two nations in 30 years. The two countries are hoping to find a new approach to resolve the long-standing dispute over Iran's nuclear weapons capabilities. Iran is seeking a framework and identification of an end goal with mutual steps to achieve the goal. Regarding Syria's chemical weapons, the U.N. Security Council's five permanent members agreed to most of the key elements of a draft resolution calling on Syria to surrender its chemical weapons. Adoption of the final resolution could occur shortly. However, crude futures reversed course and began advancing as the Department of Labor reported new jobless claims fell by 5,000 claims to 305,000 last week. Analysts had expected to see an increase in jobless claims. The Department of Commerce also reported revised GDP figures showing the U.S. economy grew at an annualized 2.5% in the second quarter, up from 1.1% in the first quarter. The positive economic news helped boost crude prices during the day. WTI crude futures closed for the day at $103.03 per barrel, up $0.37.

Natural gas prices

U.S. Henry Hub natural gas futures fell 6% this week, the biggest weekly fall in two months, primarily due to mild temperatures throughout the U.S. A higher-than-average build in natural gas inventory also added to the fall in prices.

Closing price
Note: Intra-day prices (every 6 hours); October month futures expired on September 26, 2013;
Data source: Bloomberg

  1. Last Friday, natural gas futures fell as a late-season heat wave across much of the Midwest receded. Revised weather forecasts from the National Weather Service (NWS) indicated average temperatures across most of the East Coast, putting downward pressure on futures. Baker Hughes reported the gas-directed rig count fell by 15 this week to 386. The rig count had been rising as new gas pipelines and processing plants are being built, allowing producers to connect more wells and thereby increase supplies to the market. Henry Hub natural gas futures fell 3.3 cents to close at $3.687 per MMBtu.
  2. On Monday, natural gas futures continued Friday’s fall as revised forecasts from the NWS showed moderate temperatures across most of the country in both the 6–10 and 8–14 day forecasts. Bulls looked to shut in production from flooding in Colorado last week to limit the storage build in this week's EIA natural gas inventory report. Natural gas futures closed down 8.5 cents at $3.602 per MMBtu.
  3. On Tuesday, natural gas futures fell to the lowest levels in a month as weather forecasts continued to show moderate temperatures limiting gas demand. Nearly a third of U.S. natural gas demand is derived from power generation and nearly 50% of U.S. households use natural gas for heating their homes. Mild temperatures during the shoulder season limit demand for both air-conditioning and heating. Natural gas futures fell 11 cents to $3.492 per MMBtu on the NYMEX.
  4. On Wednesday, natural gas futures traded largely sideways as investors awaited the release of EIA's natural gas inventory report on Thursday. The 6–10 day forecast from the NWS showed above-average temperatures across the northern parts of the Midwest and East Coast with the rest of the country experiencing average-to-below-average temperatures. Henry Hub natural gas futures closed nearly unchanged, up just a tenth of a penny at $3.493 per MMBtu.
  5. Natural gas futures seesawed on Thursday as EIA's weekly natural gas storage report showed U.S. natural gas inventories rising 87 Bcf to 3,386 Bcf, which was above analyst expectations. The news sent futures tumbling more than 2.5%. The build was higher than the five-year average build of 75 Bcf. However, futures began rising later in the day as traders rushed to close positions before the October contract expiration at the end of trading. Henry Hub natural gas futures for October delivery expired at $3.498 per MMBtu, up 0.50 cents. The November month contract moved to the front-month position and closed for the day at $3.567 per MMBtu, up 2.1 cents.

Futures curve

The forward curve for WTI crude is in backwardation, with June 2014 WTI futures 6% lower than near-month (November) futures primarily due to growing North American supply and concerns about a slowdown in global economic growth. However, June 2014 natural gas futures are at a premium of 7.8% over November 2013 futures due to expectations of moderate supply growth and higher demand from commercial and residential sectors in 2014.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 15.59 16.11 -3.23%
Gasoline Demand (MMBPD) 8.85 9.03 -1.99%
Distillate Demand (MMBPD) 3.58 4.05 -11.60%
Production (MMBPD) 7.78 7.83 -0.64%
Imports (MMBPD) 7.93 7.58 4.62%
Stocks (million barrels) 358.3 355.6 0.76%
Rotary Rig Count 1,369 1,361 0.59%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 3,386 3,299 2.64%
Rotary Rig Count 386 401 -3.74%
Horizontal Rig Count 1,091 1,076 1.39%
Consumption (Bcf)* 1,726 (Jun 13) 1,740 (May 13) -0.80%
Gross Withdrawals (Bcf)* 2,443 (Jun 13) 2,540 (May 13) -3.82%
Canadian Imports (Bcf)* 228.9 (Jun 13) 229.0 (May 13) -0.04%
LNG Imports (Bcf)* 8.1 (Jun 13) 5.6 (May 13) 44.64%

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

Learn more

Take a deep dive into the summary of the 2013 Deloitte Energy Conference – Innovation: Changing the Future of Energy and gain an in-depth view of how innovative thinking is making a difference in addressing the challenges and opportunities in today’s global and domestic energy markets. Read about the experiences of over 400 industry executives, investors and regulators who participated in thought-provoking interactions to address Innovation: Changing the Future of Energy.

Deloitte has prepared the Oil & Gas Mergers and Acquisitions Report – Midyear 2013: A subdued deal market follows brisk end-of-year activity. This new report covers deals from the past six months by sector and addresses the drop in merger and acquisition (M&A) activity in the first half of 2013. Both the number of deals and the value of those deals fell by 29% versus the same six months of last year. This report reveals the insights of Deloitte M&A specialists on what is driving activity in each segment.

Deloitte Global Energy & Resources practice’s new report, 2013 Oil & Gas Reality Check explores the industry fundamentals of each trend – the supply, demand, macroeconomic, regulatory, cost, price and competitive behavior factors. The paper provides insights and describes what may unfold over the short and the long term.

Deloitte’s report Surveying Energy Attitudes: Industry Insiders and the Public's Outlook on the Future of U.S. Oil and Gas summarizes a survey conducted by Deloitte on 250 oil and gas professionals, as well as over 600 members of the general population.

Deloitte's paper Exporting the American Renaissance: Global impacts of LNG exports from the United States describes an objective, economic-based analysis of the potential impact of LNG exports from the United States on domestic and global markets. While much attention has focused on the impact of U.S. LNG exports on the U.S. market, this study from Deloitte MarketPoint LLC and the Deloitte Center for Energy Solutions analyzes the potential economic consequences of those exports on global markets. It attempts to estimate the potential price impacts, gas supply changes and flow displacements if the U.S. exported a given volume of LNG to either Asia or Europe.

Deloitte's paper Energy Independence and Security: A Reality Check, discusses the realities of U.S. energy independence and energy security — and whether these are realistic and achievable goals. Understanding how to reach energy independence and security requires us to know more about our sources and uses of energy — and the realities of energy supply and demand.

Deloitte MarketPoint LLC can help energy companies with their most strategic business decisions. Deloitte MarketPoint's analytic suite, called MarketBuilder, is a data analytics solution that helps clients understand future markets and prices for most energy commodities, including oil, gas, refinery products, electricity, emissions and coal, at each point in the value chain. For more information on how Deloitte MarketPoint can help you make more strategic decisions, please visit www.deloittemarketpoint.com or email deloittemarketpoint@deloitte.com.

Save the date

November 19, 2013 – Houston, TX
Deloitte Oil & Gas Conference — Capitalizing on Success
Deloitte is dedicated to providing clients and the oil and gas industry with insights on emerging topics by hosting energy executives, political leaders, investors and industry analysts for an in-depth view of key developments and challenges facing today's global and domestic energy markets. Join industry colleagues and Deloitte’s oil and gas professionals at the annual Deloitte Oil & Gas Conference for a day of sharing industry points of views in an interactive setting. With speakers from a cross section of the world’s energy industry, the conference will address topics of interest to energy executives, boards of directors and other industry participants, including innovation in talent management, the changing outlook for oilfield services, managing capital projects and risk management strategies for the oil and gas industry. Participants will also hear insights on investing and financing, given the new energy paradigm, U.S. inbound investments and energy policy.

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