MARKET WATCH: Oil prices end first quarter lower

Crude oil prices on the New York and London markets each fell by more than $1/bbl on Mar. 31 while traders and analysts monitored US-Iran nuclear talks and awaited the government’s weekly inventory report on US oil and product supply levels, which showed another gain in crude oil levels.

Barclays Capital analysts noted oil prices have fallen for three consecutive quarters.

Analyst Michael Cohen in New York wrote in Barclay’s Blue Drum report that he believes the April-June quarter could be the weakest quarter of 2015 for oil prices, and he expects oil prices on both the New York and London markets will slowly recuperate after that.

“We expect the support to oil from temporary factors to fade away in the second quarter, and that a massive US crude oil stock build will find its way back to the global market in the form of products in the months ahead,” Cohen said.

Regarding US oil and product inventories, David Zusman, chief investment officer at Talara Capital Management, said the market “is hyperfocused on inventories filling up.” But he noted that, “The bigger picture is the decline in [the] rig count…and the likely decline in the rate of change in production that should be evident by the end of the summer (UOGR, March/April 2015, p. 7).

The Energy Information Administration said US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 4.8 million bbl for the week ended Mar. 27 compared with the previous week.

At 471.4 million bbl, crude oil inventories remained at the highest level for this time of year in at least the last 80 years, the weekly Petroleum Status Report said.

Gasoline inventories drop

Total motor gasoline inventories decreased by 4.3 million bbl last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased.

Distillate fuel inventories increased by 1.3 million bbl for the week ended Mar. 27, which EIA called the lower half of the average range for this time of year. Propane-propylene inventories rose 2.4 million bbl last week and are well above the upper limit of the average range.

Refinery inputs averaged over 15.7 million b/d last week, which EIA estimated as 198,000 b/d more than the previous week’s average. Refineries operated at 89.4% of capacity.

Gasoline production increased last week, averaging over 9.7 million b/d. Distillate fuel production increased last week, averaging about 4.9 million b/d.

US crude oil imports averaged over 7.3 million b/d last week, down by 44,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged about 7.3 million b/d, which was 0.1% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 709,000 b/d, and distillate fuel imports averaged 270,000 b/d last week.

Energy prices

The New York Mercantile Exchange May crude oil contract dropped $1.08 on Mar. 31 to $47.60/bbl. The June contract dropped $1.07 to $49.34/bbl.

The natural gas contract for May dropped a fraction of penny to remain at a rounded $2.64/MMbtu. The Henry Hub, La., gas price was $2.60/MMbtu, down 1¢.

Heating oil for April delivery was down 1.3¢ to $1.72/gal. Reformulated gasoline stock for oxygenate blending for April dropped 2¢ to a rounded $1.78/gal.

The May ICE contract for Brent crude lost $1.18 to $55.11/bbl, while the June contract was down $1.07 to $56.21/bbl. The ICE gas oil contract for April fell $1 to $526.50/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes on Mar. 31 was $51.06/bbl, down 39¢.

Contact Paula Dittrick at paulad@ogjonline.com.

*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.

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