MARKET WATCH: Energy prices continue falling

Energy prices continued falling Sept. 19 with oil dropping at a steeper rate following a surprise jump in commercial US crude inventories and a weakening euro resulting from disappointing economic data in Europe.

“Some early morning support for crude oil prices soon dissipated with weakness returning after the dollar gained some ground against the euro as Euro-zone worries once again took hold of the market. Later in the day, crude oil prices took another step down after Department of Energy numbers showed a significant increase of 8.5 million bbl (consensus was for a 1 million bbl increase) in crude oil stocks. This, coupled with high product prices, has heightened concerns over demand destruction in the US,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group.

The price of crude declined further in early trading Sept. 20 following reports of slumping exports from Japan and a September manufacturing decline in China.

“The market continues to lean to the downside, with the overnight preliminary Purchasing Managers Index reading from China (47.8, indicating a continued contraction of manufacturing activity) placing a question mark on future oil demand from that country,” Ground reported. “Euro-zone PMI readings have also seen a weaker euro, i.e. stronger dollar, which is weighing on all commodities.” More US economic data is to be released later today. “Although poor readings could extend this morning’s price weakness (as an indicator of weaker US crude oil demand), we could see the perverse reaction of a lift to prices since this might raise expectations of longer (and therefore, greater) Federal Reserve easing,” he said.

US inventories

The DOE’s Energy Information Administration reported the injection of 67 bcf of natural gas into US underground storage in the week ended Sept. 14. That increased working gas in storage to 3.5 tcf, up 320 bcf from a year ago and 278 bcf above the 5-year average.

EIA earlier reported US gasoline stocks dropped 1.4 million bbl to 196.3 million bbl last week, opposite the market’s outlook for a 1 million bbl increase. Finished gasoline increased while blending components decreased. Distillate fuel inventories dipped 300,000 bbl to 128.2 million bbl, compared with expectations of a 1 million bbl build [OGJ Online, Sept. 19, 2012).

Energy prices

The October contract for benchmark US sweet, light crudes dropped $3.31 to $91.98/bbl. Sept. 19 on the New York Mercantile Exchange. The November contract lost $3.32 to $92.30/bbl.

Heating oil for October delivery fell 8.31¢ to $3.04/gal on NYMEX. Reformulated stock for oxygenate blending for the same month was down 7.04¢ to $2.83/gal.

The October natural gas contract dipped 1.1¢ to $2.76/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., declined 4.3¢ to $2.70/MMbtu.

In London, the November IPE contract for North Sea Brent fell $3.84 to $108.19/bbl. Gas oil for October dropped $30.25 to $958.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes lost $2.52 to $108.43/bbl.

Contact Sam Fletcher at

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