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Weekly Oil & Gas Market Highlights: May 2, 2013

Deloitte Center for Energy Solutions publication

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Key Oil & Gas price indicators

Front Month Futures May 2, 2013 April 25, 2012 % Change
Oil – WTI
(USD per barrel)
$93.99 $93.64 0.4%
Oil – Western Canadian Select*
(USD per barrel)
$74.69 $76.39 -2.2%
Oil – Brent
(USD per barrel)
$102.85 $103.41 -0.5%
Natural Gas – NYMEX Henry Hub
(USD per MMBtu)
$4.03 $4.17 -3.4%

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 marginally this week boosted by positive employment data from the U.S. which outweighed the losses due to weak inventory data released earlier. The news about the monetary stimulus program and interest rate cuts in the Eurozone also supported the futures.

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

  1. Last Friday, crude futures were little changed as Nigeria announced it would not ship any June cargoes of its Bonny Light benchmark crude. Exports of other crude varieties will total only 61 shipments, the lowest level since 2010. Bonny Light shipments have been impaired by the shutdown of the Nembe Creek pipeline for repairs. Futures fell later during the day as the Department of Commerce announced the U.S. gross domestic product (GDP) data, which was below analyst expectations. GDP rose at 2.5% in the first quarter, higher than the 0.4% growth in the fourth quarter. WTI crude futures for June delivery closed down $0.64 at $93.00 per barrel.
  2. On Monday, crude futures rose as speculation grew that the European Central Bank (ECB) would continue its monetary stimulus program. The continuation of expansionary fiscal policies is expected to assist European economic recovery, which helped send the euro up versus the dollar, a bullish indicator for crude demand. Incoming Italian prime Minister Enrico Letta is expected to end government austerity programs in Italy in order to pursue economic growth policies instead. In the U.S., the Federal Reserve’s Open Market Committee (FOMC) is expected to decide on continuing its bond-buying program during its meeting scheduled for later in the week. Crude futures for June delivery closed up $1.50 at $94.50 per barrel the highest close in two weeks.
  3. On Tuesday, crude futures fell as Saudi Arabia’s Prince Turki Al-Faisal announced during a speech that the country plans to increase its production capacity to 15 MMbbl/d by 2020 from a current estimated 12.5 MMbbl/d capacity. Saudi Arabia produced 9.18 MMbbl/d during March. Futures fell as the American Petroleum Institute released its weekly inventory report, which showed that crude stocks rose by an estimated 5.18 MMbbl last week. Prices softened on expectations that the official Energy Information Administration (EIA) data would show U.S. supplies at a 22-year high when it is released later during the week. WTI crude futures fell $1.04 to $93.46 per barrel.
  4. On Wednesday, WTI crude futures fell during Asian trading as China's National Bureau of Statistics reported the official Purchasing Manager's Index was at 50.6, below analyst expectations. Later in the day, crude futures tumbled as the EIA reported that oil stocks rose by 6.7 MMbbl to 395.3 MMbbl, its highest level since 1931. Fuel consumption fell 1.4% last week to 18.3 MMbbl. Futures also reacted negatively to news that U.S. companies added only 119,000 jobs last month, the lowest level since last September, according to the Automatic Data Processing (ADP) Research Institute’s National Employment Report. Futures largely shrugged off news that the FOMC announced it would continue its $85 billion per month bond purchase program. WTI crude futures for June delivery fell $2.43 to close at $91.03 per barrel.
  5. On Thursday, crude futures rose as the ECB released a statement following its meeting in Bratislava, Slovakia that it was lowering its key interest rate to 0.5% from 0.75% in order to assist ailing European economies. Mario Draghi, President of the ECB, also announced that the ECB may cut rates further – even being open to a rate below zero – in the future and that it may charge banks a fee to keep cash with the ECB overnight. Crude futures rose sharply during U.S. trading as the Department of Labor reported that new claims for unemployment benefits fell by 18,000 to 324,000 claims, lowest since January 2008. Unemployment is currently 7.6% in the country. WTI crude futures closed at $93.99 per barrel, up $2.96.

Natural gas prices

U.S. Henry Hub natural gas futures closed down 3.4% this week due to weak inventory data. Futures fell more than 30 cents as EIA reported higher-than-expected inventory build which erased the earlier gains this week due to continuing below-average temperatures in eastern U.S.

Closing price; December futures expired on November 28.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg

  1. Last Friday, Henry Hub natural gas futures came under pressure as the 6–10 day forecast from the National Weather Service (NWS) showed above-average temperatures covering much of the country. However, the forecast by the Commodity Weather Group was cooler temperatures in the eastern half of the U.S. this week, which helped futures to rise slightly off mid-day lows. Baker Hughes reported that the gas-directed rig count fell by 13 rigs to 366, a 14-year low. The rig count for gas is down >60% from its 2011 peak of 936 rigs. Henry Hub futures for May delivery expired on Friday closing down 1.5 cents at $4.152 per MMBtu while June futures, which moved into the front-month position, closed up 2.3 cents at $4.223 per MMBtu.
  2. On Monday, natural gas futures rose on expectations of a below-average natural gas build in this week’s EIA data as a result of lingering cool weather.  The revised weather forecasts from the NWS showed above-average temperatures in the western half of the country, but below-average temperatures across most of the eastern half with only New England experiencing an above-average trend. Natural gas prices continued to be boosted by current low inventories, which are below both last year’s levels and the five-year average as a result of extended winter weather. Traders are expecting a shortened shoulder season as a result. Natural gas futures for June delivery closed up 16.9 cents (4%) at $4.392 per MMBtu.
  3. On Tuesday, natural gas futures ended lower as investors booked profits following recent gains. EIA reported that gas production in February rose by 1.27 Bcf/d (1.8%). It was the first increase in three months, but supply is still near record highs. The agency expects the marketed natural gas production to hit a new record for the third consecutive year. Temperatures in the Midwest and Texas were expected to fall well below-normal during the week, which limited the downside. The prevailing cool temperatures bolstered expectations for a below-average storage build in this week’s EIA data. Natural gas futures closed down 4.9 cents at $4.343 per MMBtu.
  4. On Wednesday, natural gas futures briefly crossed the $4.40 mark, a 21-month high, as bulls bid up contracts due to prevailing cool temperatures and expectations of a below-average build in gas inventories this week. However, futures gave back gains on profit taking as traders began to look to the onset of spring weather, which will soften natural gas prices. Natural gas futures for June delivery closed down 1.7 cents at $4.326 per MMBtu.
  5. On Thursday, natural gas futures fell sharply as EIA data showed a 43 Bcf build in gas inventories, well above analyst expectations. The data showed the third net gas injection this season, but it was the first injection that exceeded expectations. Natural gas futures slid from $4.35 to just above $4.05 per MMBtu on the news. Some traders are concerned that at current prices, natural gas for power burn is seeing increased competition from less-expensive coal. With gas production expected to reach new highs again this year, a weakening of demand is expected to be bearish for natural gas prices. Natural gas futures closed for the day at $4.025 per MMBtu, down 30.1 cents (7%), the biggest drop since August 2012.

Futures curve

January 2014 WTI futures are 2% lower than current prices due to growing North American supply and weak demand growth in major economies globally. However, January 2014 natural gas futures are at a premium of 10.7% to near-month (May) futures due to moderating supply growth, expectations of winter demand, and increased demand from commercial and residential sectors.

Data source: Factset

Weekly U.S. crude oil and natural gas data

Crude oil
Indicators This Period Prior Period % Change
Refinery Inputs (MMBPD) 14.71 14.48 1.59%
Gasoline Demand (MMBPD) 8.42 8.75 -3.77%
Distillate Demand (MMBPD) 3.66 3.58 2.23%
Production (MMBPD) 7.31 7.33 -0.27%
Imports (MMBPD) 8.16 7.56 7.94%
Stocks (million barrels) 395.3 388.6 1.72%
Rotary Rig Count 1,381 1,371 0.73%
Natural gas
Indicators This Period Prior Period % Change
Working Storage (Bcf) 1,777 1,734 2.48%
Rotary Rig Count 366 379 -3.43%
Horizontal Rig Count 1,084 1,097 -1.19%
Consumption (Bcf)* 2,557 (Feb 13) 2,863 (Jan 13) -10.69%
Gross Withdrawals (Bcf)* 2,320 (Feb 13) 2,542 (Jan 13) -8.73%
Canadian Imports (Bcf)* 228.8 (Feb 13) 262.9 (Jan 13) -12.97%
LNG Imports (Bcf)* 11.4 (Feb 13) 13.5 (Jan 13) -15.56%

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

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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 & Resources 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 these dates

May 21-22, 2013
Deloitte Energy Conference – Washington, DC
For more information or to obtain a synopsis of the 2011 Deloitte Energy Conference, please contact EnergyConference@deloitte.com

November 19, 2013
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. 
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