Weekly Oil & Gas Market Highlights: August 22, 2013
Deloitte Center for Energy Solutions publication
Key Oil & Gas price indicators
|Front Month Futures||August 22, 2013||August 15, 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 primarily due to news about the U.S. Fed’s plans to curtail its bond buying program. Prices received some support from rising tensions in the North Africa region and positive U.S. inventory data.
Note: Intra-day prices (every 6 hours); September month futures expired on August 20, 2013.
Data source: Bloomberg
- Last Friday, crude futures rose as traders eyed ongoing demonstrations and violence in Egypt as clashes between pro-Morsi demonstrators and security forces continued. Government forces stormed Ramses Square in Cairo, which led to an estimated death toll of 60 people. Demonstrations, however, continued across other parts of Egypt and have affected several cities, including Alexandria and Port Said. Futures also rose as oil and gas companies began evacuating non-essential personnel from offshore platforms in the Gulf of Mexico due to a tropical storm off the Yucatan Peninsula. The National Hurricane Center (NHC) said the storm had a 50% chance of developing into a hurricane and was forecast to pass through the southwestern portion of the Gulf. The Gulf region accounts for around 5% of U.S. natural gas and 23% of U.S. crude production. Over 45% of U.S. refining capacity lies in the Gulf Coast region. WTI futures for September delivery closed up $0.13 cents at $107.46 per barrel.
- On Monday, crude futures received support as data from Japan showed crude imports increased 2.4% in July over June. Futures rose as Egypt’s Ministry of the Interior reported dozens of protestors were detained following an attempted prison break in the country on Sunday. In North Sinai, 25 police officers were killed in an ambush by supporters of ousted President Mohammed Morsi. In Libya, crude oil production and exports remain heavily affected by strikes and militant activity. Libya's oil minister warned that government forces would forcibly remove protestors blocking the country’s oil-exporting ports if they did not disperse. Currently, Libya's oil exports have been reduced to around 0.60 MMbbl/d due to the protests and strikes. Libya has the largest reserves among OPEC's African members. Crude futures fell during New York trading, as the NHC reported the tropical storm heading for the Gulf of Mexico had failed to form into a hurricane over the weekend. Workers began returning to offshore rigs as the threat dissipated. WTI futures fell $0.36 to settle at $107.10 per barrel.
- On Tuesday, investors were cautious ahead of the release of the Energy Information Administration's (EIA) weekly oil stocks report and minutes of the July discussions of the Federal Open Market Committee (FOMC), both scheduled for Wednesday. The FOMC was planning to discuss the future of the $85 billion per month bond buying program during the meeting in Jackson Hole, WY, this week. In London trading, crude futures fell on expectations the bond buying program would be curtailed. September WTI crude futures expired on Tuesday, closing down $2.14 at $104.96 a barrel while October futures, which rolled into the front-month position, settled down $1.75 at $105.11 per barrel.
- On Wednesday, crude futures rose briefly following the release of EIA inventory data, which showed crude stocks falling by 1.43 MMbbl, beating analyst expectations. Stocks are currently 359 MMbbl, the lowest level in a year due to high refinery utilization rates of 91%. However, futures tumbled as the minutes of FOMC’s July meeting showed that committee members were "broadly comfortable" with plans to begin reducing the monthly amount of bond purchases. Fed Chairman Ben Bernanke said the bank would begin curbing its bond buying program if the U.S. economy starts to improve. The 400,000 bbl/d Seaway pipeline linking Cushing, OK, to refiners in Houston area returned to normal operations after being "essentially shut" on Tuesday as technical issues at the pumping station curtailed the power consumption along the pipeline.WTI futures for October delivery fell $1.26 cents to close at $103.85 per barrel.
- On Thursday, crude futures fell during Asian trading despite positive manufacturing data from China, due to concerns about the continuation of the Fed’s bond buying program. After a preliminary survey, HSBC reported that China’s Purchasing Manager's Index (PMI) rose to 50.1 in August, indicating expansion, from 47.7 in July. China is the second-largest oil consuming nation after the U.S. (although the EIA projects it will overtake the U.S. in October of this year) and it accounts for around 40% of the expected 1 MMbbl/d increase in global oil demand this year. During London trading, crude futures received support as Markit Economics’ PMI for Germany rose to 52 in August from 50.7 in July, exceeding analyst expectations. In Libya, oil exports resumed from the 90,000 bbl/d port of Brega, where the country was forced to declare force majeure earlier this week. Currently, export terminals at Zawiya, Mellitah, Al Jurf, and Bouri are operational while Libya's largest oil exporting port Es Sider, as well as Ras Lanuf and Zueitina, remains closed. Crude futures rose as the U.S. Department of Labor reported new jobless claims rose by just 13,000 claims to 336,000. The small increase drove the four-week average figure to 330,500, which is still the lowest level since November 2007. Crude futures closed for the day at $105.03 per barrel, up $1.18.
Natural gas prices
U.S. Henry Hub natural gas futures rose nearly 4% this week boosted by expectations of above-average temperatures in most of the U.S. and lower-than-expected inventory build. Prices were not impacted by the tropical activity news in the Gulf Coast, expecting no threat to production.
Note: Intra-day prices (every 6 hours)
Data source: Bloomberg
- Last Friday, natural gas futures fell as revised weather forecasts reported below-normal temperatures in parts of U.S. Midwest and Northeast. Forecasts from the National Weather Service (NWS) offered modest support to gas demand with above-average temperatures across much of the northern half of the country. The NHC reported a tropical storm off the Yucatan peninsula had a 50% chance of developing into a hurricane over the next few days. As a result, oil and gas companies began evacuating non-essential personnel from offshore rigs in the Gulf of Mexico. However, futures fell as traders shrugged off the news considering the Gulf of Mexico contributes to just around 5% of U.S. natural gas production. Later in the day, the NHC downgraded Tropical Storm Erin off the Cape Verde Islands to a tropical depression. Baker Hughes reported the number of gas-directed rigs rose by two rigs to 388. Natural gas futures closed down 5.1 cents at $3.368 per MMBtu.
- On Monday, natural gas futures rose sharply, driven by forecasts for warmer temperatures across much of the United States. The 6–10 day forecast from the NWS showed key demand centers of the Northeast, Mid-Atlantic, as well as portions of the West and South experiencing above-average temperatures. However, in the 8–14 day forecast, the warmer temperatures were expected to dissipate with only portions of the Southeast and West expected to experience above-average temperatures. Natural gas futures closed up 9.5 cents at $3.463 per MMBtu.
- On Tuesday, natural gas futures were nearly unchanged as traders balanced NWS’s forecasts of warmer temperatures in the 6–10 day forecast against moderating temperatures in the 8–14 day forecast. However, bears were expecting this week's natural gas storage report to show an inventory build below above historical averages. Skeptics were concerned the warming trend would not hold over the long term as temperatures begin to moderate. Natural gas futures closed down 1.9 cents at $3.444 per MMBtu.
- On Wednesday, natural gas futures rose marginally as traders viewed expectations of near-term warmer temperatures positively, but expected a bearish weekly natural gas inventory report from the EIA. Forecasts from the NWS were modestly supportive with the 6–10 day forecast continuing to show above-average temperatures across much of the northern part of the country. In the revised 8–14 day forecast, the warm trend showed some signs of strength with above-average temperatures expanding across the West Coast and the Northeast. Natural gas futures closed up 1.6 cents at $3.460 per MMBtu.
- On Thursday, natural gas futures rose as the EIA reported a 57 bcf increase of natural gas in storage to 3,063 Bcf. The injection was nearly on target for the five-year average injection of 56 Bcf, leaving the surplus to the five-year average unchanged at 1.5%. The injection, however, was below analyst expectations, which led to a bullish response in the market. Revised weather forecasts from the NWS showed above-average temperatures holding in the 6–10 day forecast and expanding in the 8–14 day forecast to cover most of the United States. Natural gas futures closed for the day at $3.545 per MMBtu, up 8.5 cents.
The forward curve for WTI crude is in backwardation, with April 2014 WTI futures being 6% lower than near-month (October) futures due to growing North American supply and concerns over slowing global economic growth. However, March 2014 natural gas futures are at a premium of 10.3% over September 2013 futures due to expectations of moderate supply growth and higher demand from commercial and residential sectors in 2013.
Data source: Factset
Weekly U.S. crude oil and natural gas data
|Indicators||This Period||Prior Period||% Change|
|Refinery Inputs (MMBPD)||15.85||15.61||1.54%|
|Gasoline Demand (MMBPD)||9.20||9.19||0.11%|
|Distillate Demand (MMBPD)||3.61||3.61||NC|
|Stocks (million barrels)||359.1||360.5||-0.39%|
|Rotary Rig Count||1,397||1,385||0.87%|
|Indicators||This Period||Prior Period||% Change|
|Working Storage (Bcf)||3,063||3,006||1.90%|
|Rotary Rig Count||388||386||0.52%|
|Horizontal Rig Count||1,077||1,065||1.13%|
|Consumption (Bcf)*||1,740 (May 13)||1,947 (Apr 13)||-10.65%|
|Gross Withdrawals (Bcf)*||2,537 (May 13)||2,485 (Apr 13)||2.09%|
|Canadian Imports (Bcf)*||229.0 (May 13)||215.1 (Apr 13)||6.48%|
|LNG Imports (Bcf)*||5.6 (May 13)||5.2 (Apr 13)||8.80%|
* 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.
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, 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.