MARKET WATCH: NYMEX oil prices rally on smaller-than-expected supply gain

Light, sweet crude oil prices for December rose by more than $2.70/bbl on the New York market Oct. 28 in a single-day rally following the release of a weekly government report that showed oil and product inventories gained, but the build was smaller than analysts had expected.

The US Energy Information Administration reported that commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased 3.4 million bbl for the week ended Oct. 23 (OGJ Online, Oct. 28, 2015).

Analysts surveyed by The Wall Street Journal before the report had said they expected the inventory would increase by 3.7 million bbl.

Ole Hansen, Saxo Bank head of commodity strategy, said the inventory report “didn’t make investors feel bullish, but it removed some nervousness from the market.” Oil prices fell again in early Oct. 29 trading.

Hansen believes it’s premature to expect any long-term positive trend, citing economic uncertainties that include the timing of an anticipated rise in interest rates by the US Federal Reserve.

A possible interest-rate increase by the Fed at its December meeting would strengthen the dollar, pressuring oil prices downward because oil trades in dollars so it would become more expensive for oil buyers using other currencies.

Regarding US natural gas stored underground in the Lower 48, EIA estimated levels at 3.877 tcf as of Oct. 23, which was a net increase of 63 bcf from the previous week. Stocks were 409 bcf higher than last year at this time and 153 bcf above the 5-year average of 3.724 tcf, the Gas Storage Report said.

Energy prices

The December crude oil contract on the New York Mercantile Exchange escalated by $2.74 to settle at $45.94/bbl on Oct. 28. The January crude oil contract climbed $2.70 to $48.82/bbl.

The NYMEX natural gas contract for November fell nearly 6¢ to a rounded $2.03/MMbtu. The Henry Hub, La., gas price went the opposite direction, gaining 3¢ to $2.10/MMbtu.

Heating oil for November delivery increased nearly 6¢ to a rounded $1.48/gal. The price for reformulated gasoline stock for oxygenates blending for November also climbed 6¢ to $1.35/gal.

The December ICE contract for Brent crude soared by $2.24 to $49.05/bbl. The January contract gained $2.28 to $49.83/bbl. ICE gas oil for November settled at $451.75/tonne, up $20.75.

The average price for the OPEC basket of 12 benchmark crudes for Oct. 28 was $43.20/bbl, up $1.

Contact Paula Dittrick at paulad@ogjonline.com.

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

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