MARKET WATCH: Energy prices fall with Saudi export increase

Energy prices continued falling Sept. 18 with front-month crude down 1.4% in the New York market after Saudi Arabia said it has hiked production and will raise it further should demand increase.

“The market sold off yesterday with energy leading the way even as volumes tracked lower than average due to Rosh Hashanah,” said analysts in the Houston office of Raymond James & Associates Inc. The front-month natural gas contract fell 3%, with the SIG Oil Exploration & Production Index down 1.9% and the Oil Service Index declining 1%.

“The market will have more chances to push higher with fresh manufacturing data out later this week; however, if New York factories serve as an early indicator, there won't be much to celebrate,” Raymond James analysts reported.

The market was up in early trading Sept. 19 after the Bank of Japan said it too will expand its monetary easing plan as the US Federal Reserve is doing.

However, Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “Crude prices started slipping later in the morning, as Euro-zone concerns fuelled a weakening of the euro. We note that the reaction in crude oil markets was particularly acute, which underscores our view that the speculative market is considerably overstretched. There is a lot of length in the non-commercial market, but confidence in those long positions is lacking, hence crude oil prices are vulnerable to further swift and significant downside moves.”

In other news Iran Oil Minister Rostam Qassemi said his country's crude exports are rebounding from the European Union embargo, having found means for insuring tankers carrying Iranian crude to Asian markets. According to the Associated Press, however, Iran’s semiofficial Mehr news agency did not reveal new export figures attributed to Qassemi. AP referenced an International Energy Agency report Iran's oil exports fell to 1 million b/d when the embargo activated in July from 1.74 million b/d previously.

US inventories

The Energy Information Administration said Sept. 19 commercial US crude inventories jumped by 8.5 million bbl to 367.6 million bbl in the week ended Sept. 14, far exceeding the Wall Street consensus for an increase of 1 million bbl. Gasoline stocks dropped 1.4 million bbl to 196.3 million bbl, opposite the market’s outlook for a 1 million bbl increase. Finished gasoline increased while blending components decreased last week. Distillate fuel inventories dipped 300,000 bbl to 128.2 million bbl, compared with expectations of a 1 million bbl build.

Imports of crude into the US rose 1.3 million b/d to 9.8 million b/d last week. In the 4 weeks through Sept. 14, US crude imports averaged 9 million b/d, up 227,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 458,000 b/d, and distillate fuel imports averaged 159,000 b/d.

The input of crude into US refineries increased 595,000 b/d to 14.9 million b/d last week with units operating at 88.9% of capacity. Gasoline production increased to 9.1 million b/d while distillate fuel production grew to 4.6 million b/d.

Energy prices

The October and November contracts for benchmark US light, sweet crudes again decreased by like amounts, down $1.33 each to closing prices of $95.29/bbl and $95.62/bbl, respectively, Sept. 18 on the New York Mercantile Exchange (OGJ Online, Sept. 18, 2012). On the US spot market, West Texas Intermediate at Cushing, Okla., also lost $1.33 to $95.29/bbl in step with the front-month futures contract.

Heating oil for October delivery declined 3.63¢ to $3.13/gal on NYMEX. Reformulated stock for oxygenate blending for the same month lost 4.43¢ to $2.90/gal.

The October natural gas contract fell 9.2¢ to $2.77/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 5.1¢ to $2.74/MMbtu.

In London, the November IPE contract for North Sea Brent retreated $1.76 to $112.03/bbl. Gas oil for October lost $22 to $988.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes fell $2.77 to $110.95/bbl.

Contact Sam Fletcher at

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