Weekly Oil & Gas Market Highlights: September 19, 2013
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators
|Front Month Futures||September 19, 2013||September 12, 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 2% this week as talks between the U.S. and Russia led to a diplomatic solution to the Syrian issue and reduced tensions in the Gulf region. While positive U.S. inventory data temporarily boosted prices, a rise in Libyan crude output exerted downward pressure.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, crude futures fell as the U.S. and Russia held talks in Geneva to discuss a diplomatic solution to the Syrian issue. Syria plans to surrender its chemical weapons to international control in order to avert a U.S. strike against the country. U.S. Secretary of State John Kerry reported initial talks had been "constructive," but gave no indication if a breakthrough had been achieved or was near. Syrian President Bashar Al-Assad said the U.S. must give up plans of a military strike and stop arming rebel factions within the country as part of any deal. In Libya, the state-owned National Oil Corporation declared force majeure on crude exports from the Mellitah, Hariga and Zawiya ports due to continued labor strikes in the country. Crude futures also fell on speculation by traders that the Federal Reserve would announce a plan to begin winding down its $85 billion per month bond buying program when it meets on September 17–18. WTI crude futures closed down $0.39 at $108.21 per barrel.
- On Monday, crude futures fell as it appeared some of the geopolitical risk premium in the oil price may have worn off due to a U.S. – Russian accord reached over the weekend in Geneva. The accord included a framework for locating and removing Syria's chemical weapons stockpiles while giving Bashar Al-Assad a week to submit an inventory of the country’s chemical weapons arsenal before initial inspections begin by November. Attention turned to the United Nations, which will soon release the report of the inspection team tasked with investigating the August 21 chemical weapons attack near Damascus. U.S. Secretary of State John Kerry and top diplomats from France and the U.K. called on the United Nations to pass a tough resolution calling for the elimination of Syria's chemical weapons. In Libya, oil production resumed at the El Feel and Sharara fields, which produce nearly 450,000 bbl/d combined, or about 25% of the country’s 1.6 MMbbl/d capacity. Last week, Libya's Deputy Oil Minister Omar Shakmak said production had fallen to 250,000 bbl/d from a total capacity of 1.6 MMbbl/d due to recent strikes. Crude futures rose as Lawrence Summers withdrew his name from consideration for the next chairman of the Federal Reserve. The crude market responded positively to the news since Summers was expected to rein in the Fed's bond-buying program more aggressively than rival Janet Yellen. Economists expected the Fed would reduce its bond buying program during this week’s meeting by $10 billion per month. WTI crude futures closed down $1.62 at $106.59 per barrel on the NYMEX.
- On Tuesday, crude futures fell for a third day as markets were calmed by the agreement between the U.S. and Russia to remove Syria’s chemical weapons. Secretary of State Kerry clarified there is no conflict between working through international inspectors to remove the chemical weapons and the U.S. administration's goal of removing Assad from power. Separately, the report from the U.N. weapons inspectors reported "clear and convincing evidence" that chemical weapons had been used near Damascus on August 21. In Libya, force majeure was lifted at the ports of Mellitah and Zawiya. In Iran, President Hasan Rohani stated Iran would be willing to decommission its Fordo uranium enrichment facility if Western-backed sanctions are reduced. WTI crude futures closed down $1.17 at $105.42 per barrel.
- On Wednesday, crude futures were flat-to-low during early trading as Libya's National Oil Corporation announced it is attempting to raise the country's oil production this week to 0.70 MMbbl/d as labor strikes ease in the country. Crude futures spiked as the Energy Information Administration (EIA) reported crude inventories fell 4.37 MMbbl/d to 355.6 MMbbl, which was above analyst expectations. Crude supplies are currently at the lowest levels in 17 months. Futures received a further boost later in the day as the Federal Open Market Committee announced it would continue its $85 billion per month bond buying program. Crude futures rose 2.5% on the news. WTI crude futures closed up $2.65 at $108.07 per barrel.
- On Thursday, crude fell as Ibrahim Al Awami, the director of Measurement for the Libyan oil ministry, announced the country’s oil production would rise above 0.70 MMbbl/d. Oil exports from the country gradually rose throughout the week as export terminals at Brega, Zawiya and Mellitah resumed operations. Some of the geopolitical risk premium may have come out of the crude price as Syrian President Assad stated during an interview that complying with the disclosure and inspection conditions of the Chemical Weapons Convention would be “no problem, we can do it tomorrow.” Tensions between the West and Iran also seemed to be easing as Iranian President Hassan Rohani stated his country would not develop nuclear weapons. WTI crude futures closed for the day at $106.39 per barrel, down $1.68.
Natural gas prices
U.S. Henry Hub natural gas futures rose over 2% this week supported by a late-summer heat wave and lower-than-average inventory build. However, concerns over growing natural gas production and the onset of shoulder season limited the gain in prices.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, natural gas futures rose, supported by continued above-average temperatures in the Midwest. The National Hurricane Center (NHC) announced a tropical depression in the Gulf of Mexico had been upgraded to Tropical Storm Ingrid, but was tracking toward Mexico's east coast, away from gas production facilities in the Gulf of Mexico. Baker Hughes reported the gas-directed rig count rose by 7 rigs to 401. The rig count has been rising from an 18-year low of just 349 rigs in June as a result of rising natural gas prices. Natural gas futures closed up 3.9 cents at $3.677 per MMBtu.
- On Monday, natural gas futures fell during early trading as Tropical Storm Ingrid weakened as it made landfall in northern Mexico. Natural gas production from the Gulf of Mexico accounts for ~5% of current U.S. natural gas production. However, futures rose later during the day as Citi Futures Perspective estimated a net injection of 62 Bcf, which is below the five-year average gain of 74 Bcf, in EIA’s inventory report this week. Further, prices were supported by revised weather forecasts which showed above-normal temperatures in the central U.S. region. Natural gas futures fell 6.1 cents to close at $3.738 per MMBtu.
- On Tuesday, natural gas futures rose on expectations current warm temperatures in the Midwest would result in a bullish natural gas storage report from the EIA later this week. Traders also saw support from the flooding in Colorado, which had shut in production in the region. The flooding helped spark speculation that this week’s inventory report would be the first since April to show an injection below year-ago levels. Nuclear power plants are also undergoing seasonal maintenance, which is expected to boost natural gas demand in order to make up for lost generation capacity. Natural gas futures closed up 0.7 cents at $3.745 per MMBtu.
- On Wednesday, natural gas futures fell as the NWS’s 6–10 day forecast showed mild weather across the East Coast and in the West. The NHC said a large area of low pressure across the Yucatan peninsula had an 80% chance of developing into a tropical storm within the next five days. The system could be pushed further north into the Gulf of Mexico and could make landfall between Louisiana and Texas. Natural gas futures fell 3.2 cents to settle at $3.713 per MMBtu.
- On Thursday, natural gas futures rose as the EIA reported working gas in storage rose by just 46 Bcf to 3,299 Bcf. Higher-than-expected demand from power and utilities contributed to the low gas injection this week. The injection, which was lower than analyst expectations, was below both the year-ago injection of 61 Bcf and the five-year average injection for this time of year of 74 Bcf. Natural gas futures have risen >20% over the past two weeks driven by a late summer heat wave in the Midwest. However, prices fell later in the day as traders grew concerned about the near-record levels of gas production, the onset of shoulder season and expectations of higher inventory build in coming weeks. Natural gas futures closed for the day at $3.720 per MMBtu, up 0.7 cents.
The forward curve for WTI crude is in backwardation, with June 2014 WTI futures 8.2% lower than near-month (October) futures due to growing North American supply and concerns over a slowdown in global economic growth. However, June 2014 natural gas futures are at a premium of 7.2% over October 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
|Indicators||This Period||Prior Period||% Change|
|Refinery Inputs (MMBPD)||16.11||15.90||1.32%|
|Gasoline Demand (MMBPD)||9.03||8.61||4.88%|
|Distillate Demand (MMBPD)||4.05||3.52||15.06%|
|Stocks (million barrels)||355.6||360.0||-1.22%|
|Rotary Rig Count||1,361||1,365||-0.29%|
|Indicators||This Period||Prior Period||% Change|
|Working Storage (Bcf)||3,299||3,253||1.41%|
|Rotary Rig Count||401||394||1.78%|
|Horizontal Rig Count||1,076||1,075||0.09%|
|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%|
* 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
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 firstname.lastname@example.org.
Save these dates
November 19, 2013
Deloitte Oil & Gas Conference: Capitalizing on Success – Houston, TX
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.
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.