Crude Oil
Oil Update
Crude Oil Price: $92.56
Oil Benchmarks Move Closer Together, Even As They Fall
Operators of a pipeline that will transport crude from its U.S. Midwest storage hub to the Gulf Coast’s refinery complex announced it will open the spigots this weekend. The move will reduce a vast glut of oil that has pooled in the middle of the country and narrowed the difference between the oil market’s two benchmark contracts.
The spread between the contracts for West Texas Intermediate, the U.S. benchmark, and Brent, the European standard, contracted nearly $2 Thursday, to $14.93.
The flow of crude through the reversed Seaway pipeline, running from Cushing, Okla., to the Gulf, is expected to bring the two benchmarks closer to parity. The difference between the two contracts was more than $19 early last month.
Historically, the contracts usually traded within pennies of each other, but a large gap opened up in the last two years. WTI was weighed down by the excess supply bottled up in the Midwest; Brent was pushed up as Middle East tensions raised supply concerns.
Though the news was generally bullish for U.S. crude prices, the West Texas contract still fell on Thursday, settling down 25 cents, or 0.3%, to $92.56 a barrel on the New York Mercantile Exchange. The Brent contract fell by an even larger $2.26, or 2.1%, to $107.49.
Both contracts were beset by the continued move against risk assets in the markets and a sour economic outlook, weighed down by European financial woes and weak U.S. readings on employment and regional business activity.
Still, supply-demand fundamentals have been deteriorating in the oil markets, with U.S. government data showing inventories at a 22-year high, rising more than 10% in the last eight weeks on a combination of weakening demand and growing supply.
Though the Seaway pipeline is expected to carry 150,000 barrels a day to the Gulf, some analysts and traders say it won’t be enough to reduce the growing U.S. supply glut at Cushing anytime soon–and maybe not even after its capacity is expanded to 400,000 barrels per day early next year.
“There are certainly those that believe even if you get to 350,000 or 400,000, it still won’t alleviate oversupply,” said Tom Bentz, director of BNP Paribas Prime Brokerage. “Right now, 150,0000 is not going to do it.”
Nymex oil futures have fallen 16.3% from their highs earlier this year amid geopolitical tensions between Iran and the West, and 12.8% since the start of the month as financial conditions in Europe have turned south once again. Thursday’s loss marked the fifth consecutive new low settlement for 2012, and analysts and traders say they see little upside to the market anytime soon.
“This is a steep and damaging drop in oil prices that will have implications for the foreseeable future,” Dominick Chirichella of the Energy Management Institute said in a note. “The uptrend that was in place since late last year (mostly geopolitically driven) has been broken and all technical signs point to a sustained downward trend going forward.”
Front-month June reformulated gasoline blendstock, or RBOB, settled down 4.27 cents, at $2.8782 a gallon, its lowest level since Feb. 2. June heating oil finished down 4.86 cents, at $2.8490 a gallon.
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Oil Update
Crude Oil Price: $97.08
Crude Ends Modestly Higher After 6-Day, 8.8% Fall
U.S. crude oil futures settled modestly higher Thursday, snapping a six-day losing streak that slashed prices by 8.8% to three-month lows.
Traders said the gain doesn’t upset the recent trend in the nervous and oversupplied market, with little sign that crude soon will add back the $9 a barrel shed this month. Prices failed to extend losses below Wednesday’s low of $95.17 or top $98, a would-be milestone for a further recovery.
Prices haven’t topped $100 a barrel since a week ago, when Abdulla Salem El-Badri, the secretary general of the Organization of Petroleum Exporting Countries, called oil prices too high and said they threaten to cause demand destruction. OPEC will keep output high, aiming to knock international prices below the century level, he said.
OPEC said in its monthly oil report Thursday that April output, estimated by independent sources, rose by 320,000 barrels a day from March. That’s eight times more than the 40,000 barrels a day OPEC increased its global demand forecast by in the same report.
“That’s not an argument for higher prices,” says Tim Evans, analyst Citi Futures Perspective.
OPEC said it expects global demand to rise 900,000 barrels a day, to about 88.7 million barrels a day, a figure that is in line with the latest projection from the U.S. Energy Information Administration.
Light, sweet crude oil for June delivery on the New York Mercantile Exchange settled 27 cents higher, at $97.08 a barrel.
ICE June North Sea Brent crude settled 47 cents lower, at $112.73 a barrel, matching Tuesday’s price, which was the lowest since Feb. 2.
Traders said the pause in the downfall came amid light volume and position adjustments by commodity funds, which normally roll their holdings into the forward contracts around this time of the month. Nymex June crude’s discount to July narrowed by 1 cent to 33 cents a barrel, the slimmest spread since Feb. 16. At the May crude expiration on April 20, the front-month discount to the second month was 83 cents a barrel.
Crude prices have been battered in recent days as U.S. crude inventories have risen to the highest level since August 1990. The EIA forecasts that refiners, returning from seasonal maintenance, will boost processing rates to 15.1 million barrels a day this month, more than 300,000 barrels a day above current levels. But crude stocks are expected to end May at their highest level for the month since 1981.
The market is still facing the “same lousy fundamentals that have been hiding in plain sight for some time,” said Evans. “People don’t know what to do: Buy the dip or dump long positions?”
Reformulated gasoline blendstock futures for June delivery settled 1.39 cents lower, at $301.02 a gallon. June heating oil settled 1.57 cents lower, at $2.9834 a gallon.
Oil Update
Crude Oil Price: $102.54
Brent Crude Falls to Lowest Since February
U.S. oil futures tumbled to their lowest level in two weeks Thursday, while the main European benchmark slid to its weakest finish since February, weighed down by a slew of disappointing economic data.
Light, sweet crude for June delivery settled $2.68, or 2.6%, lower at $102.54 a barrel on the New York Mercantile Exchange. That’s the benchmark’s weakest finish since April 19.
Brent crude on the ICE futures exchange recently gave up $2.20, or 1.9%, to $116 a barrel, on track for its lowest finish since Feb. 6.
Traders and analysts said they are bracing for what is likely to be a weak reading Friday of U.S. nonfarm payrolls data. Expectations are low after payrolls giant Automatic Data Processing Inc. on Wednesday said fewer than expected jobs were added to the U.S. economy in April.
“It’s a combination of less-than-encouraging macroeconomic headlines, and I think you’re getting some money taken off the table ahead of tomorrow’s jobs report,” said Stephen Schork, editor of the Schork Report, an energy newsletter.
Futures were also weighed by indications that the European Central Bank isn’t planning additional stimulus measures to prop up Europe’s flagging economy. ECB President Mario Draghi said it is up to governments to foster growth, and resisted pressure to take additional steps such as interest-rate cuts and more bank lending.
“It was the statements out of Draghi, which was more doom and gloom. The sentiment is just not very good,” said Rich Ilczyszyn, chief market strategist at brokerage iiTrader.
The comments come as Europe’s economic recovery is looking increasingly tenuous. Earlier this week, Spain disclosed it is officially in a recession. This weekend, French voters are expected to elect a socialist president who is likely to challenge the European Union’s recent austerity push.
In the U.S., the economic outlook isn’t looking much better. On Wednesday, ADP said only 119,000 private-sector jobs were created in April, far below the 175,000 jobs expected.
Oil-market participants keep a close eye on employment data for signs on oil and fuel demand. High unemployment in the U.S., the world’s biggest oil consumer, has been a major factor behind the slump in demand for gasoline because it means fewer motorists traveling to work or taking vacations.
The weak U.S. economy is likely to keep oil demand weak for the near future, said Dominick Chirichella, analyst at the Energy Management Institute. “All signs continue to point to the U.S. economy moving into another slow patch,” he said. “I expect oil consumption to remain in a contraction trend that has been in place since 2007.”
Front-month June reformulated gasoline blendstock, or RBOB, settled 2.57 cents, or 0.8%, lower at $3.05 a gallon. June heating oil settled 5.56 cents, or 1.8%, lower at $3.0869 a gallon.
Oil Update
Crude Oil Price: $103.55
Nymex Crude Gains With Equities, Products Rise
U.S. crude futures rose Thursday, helped by gains in stock markets and fuel products that pushed oil to the highest settlement in three weeks.
Light, sweet crude for June delivery settled 43 cents higher at $104.55 a barrel on the New York Mercantile Exchange, the highest settlement price since April 2. Brent crude on the ICE futures exchange settled 80 cents higher at $119.92 a barrel.
Oil prices were lifted by a rise in stock markets, which have served as a proxy for oil traders trying to gauge economic growth, and fuel demand. Better-than-expected housing data trumped a disappointing report on U.S. jobless claims, and sent the Dow Jones Industrial Average 0.9% higher to recently trade at 13,212.
As Iran worries have moved to the back of investors’ minds, the state of the global economy has become the main driver of oil prices in recent weeks. On Friday, the Commerce Department is due to report U.S. gross domestic product growth, which could help to knock crude out of its recent trading range.
“GDP is going to be big,” said Rich Ilczyszyn, a broker at IITrader in Chicago. “Commodity guys are kind of sitting here biding time…we’re going to be very, very sensitive to outside market influence.”
U.S. oil prices initially dipped Thursday following the release of data from the Labor Department showing that new claims for unemployment benefits remain elevated. But as stocks rallied and Europe’s Brent crude aimed higher, its counterpart on the Nymex rebounded. A rise in gasoline futures also helped to pull oil futures higher.
Walter Zimmermann, chief technical analyst at United-ICAP, said that technical analysts suggested Nymex crude should continue to rally towards $107 a barrel as traders move to unwind bearish bets, a process known as short covering.
“When a market gets oversold and needs to correct, you don’t really need news for the rebound,” Zimmermann said.
On Wednesday, crude received a late-session boost when the Federal Reserve raised its outlook for 2012 U.S. economic growth. But the Fed also lowered slightly its outlook for 2013 and 2014.
Front-month May reformulated gasoline blendstock, or RBOB, settled 2.76 cents, or 0.9%, higher at $3.1833 a gallon. May heating oil settled 3.33 cents, or 1.1%, higher at $3.1944 a gallon.
Oil Update
Crude Oil Price: $102.67
Crude Ends Lower On Weak US Jobs Data
Oil futures crept lower Thursday, weighed down by a disappointing reading on U.S. jobless claims that raised worries about the economy of the world’s biggest oil consumer.
Gasoline futures, meanwhile, sank to their lowest level since February, raising the possibility that consumers could get some relief at the pump this summer.
“Today’s rapid decline to lowest levels in more than two months suggests to us that…this sharp price selloff could prove sustainable into next month,” said Jim Ritterbusch, head of the trading advisory firm Ritterbusch & Associates, of the drop in gasoline prices.
Initial jobless claims fell by 2,000 to 386,000 last week, while the four-week moving average of claims rose by 5,500 to a seasonally adjusted 374,750, the highest number of claims since Jan. 28, according to the Labor Department.
Oil market participants monitor U.S. jobless claims and other employment measures because they offer a window into the economic health of the world’s biggest oil consumer. Jobless rates are closely correlated with oil demand.
Light, sweet crude for May delivery settled 40 cents, or 0.4%, lower at $102.27 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently gained 3 cents to $118.00 a barrel.
Front-month May reformulated gasoline blendstock, or RBOB, settled 4.86 cents, or 1.5%, lower at $3.1541 a gallon, its lowest level since Feb. 29.
The overall employment picture in the U.S. has been improving for months, offering hope that the U.S. has emerged from the worst of the slump. The gradually improving data–as well as other factors–have helped buoy crude prices, keeping the Nymex contract above $100 a barrel for much of this year.
But the pace of improvement has slowed recently. In March, U.S. employers added 120,000 nonfarm jobs, half of what they added in the previous month.
At the same time, oil prices have eased from their recent highs. Nymex crude hit a recent peak near $110 a barrel in February, before pulling back in recent weeks.
“The unemployment claims were a little bit bigger than expected,” said Peter Donovan, vice president at Vantage Trading in New York.
Crude prices had been in firmly positive territory overnight after a successful bond auction by Spain. Investors have been keeping a close eye on the ongoing debt problems in the euro zone, which have dented demand for crude oil in Europe and raised fears of a broader economic crisis.
In the auction, Spain sold EUR2.54 billion in bonds, just above the upper end of the target range. However, the Spanish Treasury confirmed it paid a higher yield on the 10-year bond than previously. And the relief was tempered by the small size of the auction.
May heating oil settled up 0.69 cent, or 0.2%, to $3.1251 a gallon.
Oil Update
Crude Oil Price: $103.64
Crude Climbs, Though IEA Eases Supply Fears
Oil futures finished higher Thursday as equities rallied, despite a closely watched report from an energy watchdog saying that the crude-oil market is amply supplied.
Light, sweet crude for May delivery settled 94 cents, or 0.9%, higher at $103.64 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled $1.53, or 1.3%, higher at $121.71 a barrel.
The International Energy Agency said production from the Organization of Petroleum Exporting Countries ran ahead of demand during the first quarter, while Saudi Arabia and China stockpiled oil. Oil stocks rose by as much as 1.2 million barrels a day during the first three months of the year, the IEA said.
“The cycle of repeatedly tightening fundamentals evident since 2009 has been broken for now,” the IEA said in its monthly analysis of global energy markets. The IEA represents the world’s developed energy-consuming countries.
The IEA’s report suggests that the increasingly stringent sanctions imposed by Western countries on Iran aren’t choking off oil supplies as feared. Sanctions have reduced Iranian production by close to 10%, the IEA said.
The stand-off between Iran and the West over Tehran’s nuclear program has been a major factor in this year’s oil-market rally. The rising tensions have led to tightening sanctions and heightened worries about a possible blockade in the Strait of Hormuz or a military confrontation. Either outcome would likely send oil prices rising sharply, analysts say.
But tensions have cooled in recent weeks, as both sides show increasing willingness to pursue diplomacy. This weekend, Iran is set to meet with major global powers in Istanbul to discuss its nuclear program.
Oil prices have also given back much of their recent gains. Nymex crude has fallen more than 5% from its recent high near $110 a barrel reached in late February.
Prices have also been weighed by a weakening jobs picture in the U.S., the world’s largest oil consumer. The Labor Department said Thursday the number of U.S. workers applying for jobless benefits rose 13,000 last week to a seasonally adjusted 380,000–the biggest weekly rise in claims in nearly a year.
Traders, however, looked past the bearish cues on Thursday, as oil prices followed broader markets higher. The Standard & Poor’s 500 Index was recently up 1.4% to 1387, rising as New York Fed President William Dudley said interest rates will likely remain low.
Prices were also buoyed by a weaker dollar, with the ICE Dollar Index off 0.6% to 79.289. A weaker dollar typically boosts crude prices by making the dollar-denominated commodity cheaper for holders of other currencies.
“We’re not up today based on a physical shortage. We’re up today because the S&P 500 is up and a lot of other commodities are up,” said Tim Evans, energy analyst at Citi Futures Perspective in New York. “It’s a risk-on trade flow.”
Front-month May reformulated gasoline blendstock, or RBOB, settled 6.12 cents, or 1.9%, higher at $3.3567 a gallon. May heating oil settled 5.14 cents, or 1.7%, to $3.1663 a gallon.
Oil Update
Crude Oil Price: $103.31
Crude Finds Support on Jobs Data
Crude futures found some support Thursday on stronger gasoline demand and better jobs data. Both appear to be signs that the U.S. economy remains in a recovery mode.
Front-month Brent futures traded $1.09 higher to settle at $123.43 per barrel. On the NYMEX, WTI crude finished up $1.84 to $103.31 per barrel for the May contract.
Meanwhile, natural gas futures were not so fortunate. Contracts for May Henry Hub were off 5 cents to $2.09 per MMBtu at settlement.
RBOB gasoline contracts for May gained a penny to settle at $3.34 per gallon.
Commodities markets will be closed Friday, April 6 in commemoration of Good Friday.
Oil Update
Crude Oil Price: $102.78
Another Down Day for Energy
Of the four products routinely tracked by Rigzone, futures for natural gas fell the most on Thursday. The 5 percent decline on the day in the May Henry Hub contract was likely a response to an announced weekly storage report where the injection was higher than anticipated. There is now a growing concern that natural gas will fall below $2 per MMBtu for the front-month contract.
Brent and WTI crude also traded lower, falling 1.4 percent and 2.5 percent, respectively. The continued leak at the Elgin platform in the North Sea most likely buoyed action for Brent futures against a backdrop of commodities reacting unfavorably to another wave of global economic concern.
Light, sweet crude for May delivery dropped $2.63 to $102.78 per barrel. May futures for Brent crude settled at $122.39 per barrel, a decrease of $1.77 per barrel compared to Wednesday’s close.
May reformulated gasoline blendstock, RBOB, lost 2 cents to finish at $3.34 per gallon.
Natural gas lost 13 cents to settle at $2.14 per MMBtu for the May Henry Hub contract.
Oil Update
Crude Oil Price: $105.35
Crude Prices Continue to Yo-Yo
Down Tuesday, up Wednesday, and now down again Thursday; the price of crude has definitely been bouncing around of late. Thursday’s losses were pressured by the Chinese Manufacturing figures, which according to the HSBC purchasing managers’ index fell to a four-month low of 48.1 in March.
WTI Intermediate crude futures suffered a loss of 1.8 percent, down $1.92 to settle at $105.35 per barrel on the NYMEX. Brent crude for the May contract also fell Thursday. Front-month Brent settled at $123.14 per barrel, or down $1.06, on Thursday.
Reformulated gasoline also fell in line, dropping less than one percent to settle 2 cents lower at $3.3396 per gallon.
Natural gas was one of the weaker energy commodities trading, falling 9 cents, or 3.9 percent, to $2.27 per MMBtu at settlement of the April contract.
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Oil Update
Crude Oil Price: $105.11 at 4:15 PM
Crude Settles Slightly Lower; US Denies Deal To Tap Oil Stockpile
Oil futures prices were roiled Thursday by a report that the U.S. had reached an agreement to release oil from its emergency reserves — only to be calmed less than an hour later by a White House denial.
A relatively quiet morning was interrupted by a Reuters news service story that the U.K. expected the U.S. to act soon to release oil from the Strategic Petroleum Reserve — or SPR, the nation’s emergency oil stockpile — in the face of rising prices. The report came a day after President Barack Obama and British Prime Minister David Cameron said they would keep open discussions about a possible release of oil reserves, a U.K. official familiar with the talks said.
Oil futures on the New York Mercantile Exchanges dropped more than $2 to a one-month low of $103.78 on the report. But most of those losses were erased after the White House spokesman Jay Carney called the report “inaccurate” and “false” and denied any deal for an oil release was in place.
The release of the oil would increase global supplies and drive the price of oil lower. Despite the denial, some say the damage had already been done to the bullish outlook for prices.
Tensions between Iran and the west, over Tehran’s nuclear program, have pushed U.S. crude prices 11% higher since November as traders fretted that Iran could move to disrupt supplies traveling through the Strait of Hormuz, through which a third of the world’s seaborne crude passes. Thursday’s hubbub reminded traders that governments stand ready to add to supplies in the event of an Iran-related event.
“With this idea in the back of its mind, I think the market’s going to be a little sketchy going forward,” said Carl Larry of the Oil Outlooks and Opinions newsletter of the possibility of a release of oil reserves.
“Nobody wants to take a risk” of betting on prices going higher, he added.
April-delivery light, sweet crude oil on the New York Mercantile Exchange settled 32 cents lower at $105.11 a barrel.
ICE North Sea Brent crude for April settled $1.42 lower at $123.55 a barrel.
The U.S. was the linchpin of a move by the International Energy Agency in June 2011 to release 60 million barrels of crude oil from emergency stockpiles amid concerns over a supply shortage caused by the Libyan civil war. The U.S. provided half of the emergency oil released then.
Rising prices of crude and crude products like gasoline, along with the continuing standoff between Iran and the west, has stirred market chatter that a similar release may be forthcoming.
North Sea Brent crude oil prices have recently traded to near their highest levels since 2008 and gasoline prices in the U.S. have climbed and are widely expected to top $4 a gallon nationwide for the first time since summer 2008.
Still, some analysts said that despite talk of a release from emergency reserves, there isn’t a shortage of oil.
“A shortage of crude or products does not currently exist within the U.S., and European product markets appear adequately supplied,” said Jim Ritterbusch, president of Ritterbusch and Associates, a Galena, Ill., research firm.
Tony Rosado, broker at GA Global Markets, said Nymex crude could soon slip to $98 a barrel, for the first time since early February as the hot market is chilled by talk of stock releases.
But Gene McGillian, broker and analyst at Tradition Energy in Stamford, Conn., said after all the frenzy over the SPR talk, “all the same factors are going to continue to provide support,” including worries about a disruption of Iranian oil supply, which he said adds a $10-to-$15 a barrel premium to prices.
On Wedneday, the head of the International Energy Agency, the oil policy watchdog for the major industrialized nations, said that an oil release isn’t now needed. “At this moment, there is no reason to use it,” said Maria van der Hoeven, IEA executive director. She said demand is slipping due to slower economic growth, but there are signs of a tightening market as global inventories are below five-year averages for a seventh straight month in the major industrialized nations.
Saudi Arabia, the world’s largest oil exporter, has lifted output to a three-decade high of 10 million barrels a day and Oil Minister Ali al-Naimi said the country stands ready to cover “any shortfalls — perceived or real — in crude oil supply.”
In the U.S. company-held inventories of crude oil and petroleum products are sufficient to meet 56 days of current demand, four days above the five-year average, but at the same level as last June, when the U.S. led an IEA move to tap emergency stocks, government data for March 9 show.
Last June, when the U.S. sold 30 million barrels of oil from the Strategic Petroleum Reserve amid Libya supply worries, stock cover was three days above the five-year average.
Meanwhile, the near 700 million barrels of SPR crude is sufficient to cover 82.5 days of US net oil imports, the highest level since 1992, according to Energy Information Administration data. The level of cover at the end of 2011 rose from 77 days in 2010 as net imports dropped more than 1 million barrels a day and the U.S. became a net exporter of petroleum products for the first time in 60 years.
The relatively high level of inventory could provide an argument against critics who say the U.S. would be vastly depleting its emergency stocks if the Obama administration decides to tap the reserve, as it did last June during Libya’s civil war. A similar 30-million-barrel drawdown in the reserve would put stocks at near 666 million barrels. Measured against the EIA’s projection of 2012 net imports, reduced SPR stocks would cover 79 days of net imports at the end of 2012, or two days more than they did at the end of 2010 and eight days more than the five-year average level.
In Thursday’s trading reformulated gasoline blendstock futures for April settled 5.85 cents lower at $3.2885 a gallon. April heating oil settled 3.93 cents lower at $3.2225 a gallon.
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