Weekly Oil & Gas Market Highlights: July 25, 2013
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators
|Front Month Futures||July 25, 2013||July 18, 2013||% Change|
|Oil – WTI
(USD per barrel)
|Oil – Western Canadian Select*
(USD per barrel)
|Oil – Brent
(USD per barrel)
|Natural Gas – U.S. Henry Hub
(USD per MMBtu)
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 2% this week largely due to a rise in U.S. crude production and weak housing data. Expectation of a slowdown in Fed’s bond buying program and weak economic data from China also added to the fall in prices.
Note: Intra-day prices (every 6 hours); August month futures expired on July 22, 2013;
Data source: Bloomberg
- Last Friday, crude futures rose to a 16-month high as Moody's Investors Service revised its outlook for U.S. government debt to stable from negative citing moderate economic growth. In August 2011, Moody's had lowered the U.S. government's Aaa credit rating to negative over concerns about the weakening economy and lack of fiscal discipline in Washington. Further upside was seen as Federal Reserve Chairman Ben Bernanke indicated that an end to the $85 billion per month bond-buying program was not imminent. The news sent the dollar lower, which is bullish for dollar-denominated crude. WTI futures briefly traded above Brent during the day for the first time since 2010. Improved pipeline networks, pipeline reversals, and increased rail shipments have helped boost WTI prices as greater volumes of oil stocks at Cushing, OK, are being moved to Gulf Coast refiners. WTI futures have risen 18% this year, while Brent futures have fallen 2.5% since the beginning of 2013. However, both WTI and Brent prices moderated as traders booked end-of-week profits. August WTI crude futures closed up $0.01 at $108.05 per barrel on the NYMEX. Brent closed down $0.63 at $108.07 per barrel on the ICE Futures Europe exchange.
- On Monday, crude futures rose during Asian trading as Japanese Prime Minister Shinzo Abe's Liberal Democratic Party won a majority in upper house elections. Prime Minister Abe vowed to continue his government's easy money policy in order to boost the country’s economic growth. During New York trading, crude futures fell sharply as the National Association of Realtors reported that sales of previously owned homes fell 1.2% in June to an annualized rate of 5.08 million, below economist expectations. Also weighing on futures is a disappointing earnings season which raises concerns about the health of the U.S. economy. WTI futures for August month delivery expired down $1.14 to settle at $106.91 per barrel on the NYMEX. Brent futures gained $0.59 cents to close at $108.66 a barrel on the ICE Futures Europe exchange.
- On Tuesday, crude futures fell as Bloomberg’s economist survey showed about half of the economists surveyed expected a reduction in Fed's bond buying program from $85 billion to $65 billion in September. Also 13 of the 54 economists predicted the program would end sometime in the second quarter of 2014. However, prices rebounded as Chinese Premier Li Keqiang stated that the government remains committed to target a 7% expansion of the Chinese economy in order to meet its goal of doubling domestic GDP between 2010 and 2020. WTI futures for September delivery advanced 29 cents to settle at $107.23 a barrel on the NYMEX.
- On Wednesday, crude futures fell as HSBC Holdings and Markit Economics released their preliminary July estimate of China's purchasing manufacturers index (PMI) at 47.7. If the estimate holds, it will be the lowest level in 11 months. A figure below 50 indicates contraction. The final report will be published on August 1. Meanwhile, Europe's PMI rose to 50.1 in July from 48.8 in June, according to Markit Economics.Crude futures tumbled as the Energy Information Administration (EIA) released its weekly oil report, which showed U.S. production up nearly 1% to 7.56 MMbbl/d, the highest level since 1990. Rising U.S. domestic crude production has resulted in increased supply and downward pressure on WTI prices. The report showed a modest decline of 2.8 MMbbl in crude inventories, which stands at 364.2 MMbbl. WTI crude for September delivery fell $1.84 to close at $105.39 per barrel.
- On Thursday, Germany's Ifo Business Climate Index rose to 106.2 in July from 105.9 in June, which was above analyst expectations. The long-term average of the index is 101. However, crude futures fell as the Department of Labor reported new unemployment claims in the U.S. increased by 7,000 to 343,000 claims. In positive news, the Department of Commerce reported durable goods orders were up 4.2% in June, well above analyst expectations. WTI crude futures fell $0.10 to close for the day at $105.49 per barrel.
Natural gas prices
U.S. Henry Hub natural gas futures fell over 4% this week primarily due to forecasts of moderate temperatures throughout the U.S. Although a lower-than-expected inventory build offered some support, traders remained concerned about the higher injections expected in coming weeks.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, natural gas futures closed down on profit-taking after the run-up in prices the day before. Weather forecasts from the National Weather Service (NWS) failed to provide support, showing mostly moderate temperatures covering most of the U.S. in both the 6-10 and 8-14 day forecasts. Baker Hughes rig data showed natural gas-directed rigs increasing by 7 to 369. Henry Hub natural gas futures closed down 2.3 cents at $3.789 per MMBtu.
- On Monday, natural gas futures continued to fall as revised weather forecasts from the NWS showed temperatures were expected to remain moderate in key demand centers following a heat wave the past week. Nuclear power plant outages at 3,700 MW offered little support as they were below both last year's 9,300 MW and the five-year average for outages at this time of year of 5,100 MW. Natural gas futures closed down 11.2 cents at $3.677 per MMBtu.
- On Tuesday, natural gas futures rebounded during the day as traders expected last week’s warm temperatures to curb the natural gas injection in storage this week. However, limiting the upside was a forecast from the NWS for the next two weeks, which showed moderate temperatures throughout the U.S. Natural gas futures closed up 6.6 cents at $3.743 per MMBtu.
- Natural gas futures ended lower after a seesaw session on Wednesday. Early buying during the day was driven by news that Tropical Storm Dorian had formed in the eastern Atlantic, heading west-northwest with winds at 50 mph. However, concerns about moderate temperatures helped pushed prices down later in the day. Natural gas futures closed down 4.5 cents at $3.698 per MMBtu.
- On Thursday, natural gas futures fell even as the EIA reported that natural gas inventories increased only 41 Bcf, below analyst expectations. The injection was also below the five-year average injection of 53 Bcf, and it was the second consecutive week of lower-than-expected net injection. However, with moderate temperatures forecast in the coming weeks, traders expect larger injections, which will be bearish for the market. Natural gas futures closed for the day at $3.644 per MMBtu, down 5.4 cents.
The forward curve for WTI crude is in backwardation where March 2014 WTI futures are 7% lower than near-month (September) futures due to growing North American supply and concerns over global economic growth. However, March 2014 natural gas futures are at a premium of 8% to August 2013 futures due to moderating supply growth and rising demand from commercial and residential sectors.
Data source: Factset
Weekly U.S. crude oil and natural gas data
|Indicators||This Period||Prior Period||% Change|
|Refinery Inputs (MMBPD)||16.03||16.24||-1.29%|
|Gasoline Demand (MMBPD)||8.98||8.73||2.86%|
|Distillate Demand (MMBPD)||4.31||3.82||12.83%|
|Stocks (million barrels)||364.2||367.0||-0.76%|
|Rotary Rig Count||1,395||1,391||0.29%|
|Indicators||This Period||Prior Period||% Change|
|Working Storage (Bcf)||2,786||2,745||1.49%|
|Rotary Rig Count||369||362||1.93%|
|Horizontal Rig Count||1,058||1,058||NC|
|Consumption (Bcf)*||1,946 (Apr 13)||2,508 (Mar 13)||-22.43%|
|Gross Withdrawals (Bcf)*||2,481 (Apr 13)||2,548 (Mar 13)||-2.64%|
|Canadian Imports (Bcf)*||215 (Apr 13)||240 (Mar 13)||-10.61%|
|LNG Imports (Bcf)*||5.2 (Apr 13)||8.3 (Mar 13)||-37.64%|
* 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.
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 new 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, Oil & Gas Mergers and Acquisitions Report – Year-end 2012: Stable oil prices support a healthy deal market covers deals from the past 12 months by sector and reveals the insights of Deloitte merger & acquisition (M&A) specialists on what is driving activity and what this says about how the business is changing, as the oil and gas industry continued to demonstrate strong M&A activity in 2012.
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 email@example.com.
Save these dates
September 18-20, 2013
2013 Deloitte Alternative Energy Seminar – Innovation: Changing the Future of Alternative Energy
This seminar focuses on the unique business, tax, and accounting issues affecting companies operating or investing in the alternative energy sector. Plenary sessions will examine the future of alternative energy and ways innovative thinking is making the difference in addressing the challenges and opportunities the sector faces. These sessions will also explore how business strategies are adapting as a result of broader energy industry impacts such as energy management, competing technologies and a changing fuel mix. Elective sessions allow participants to delve into the unique business and technical issues faced by companies operating or investing in alternative and renewable energy.
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.
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.