Sam Fletcher
Senior Writer
HOUSTON, Feb. 20 -- A technical glitch that halted trading on the New York Mercantile Exchange only 1.5 hours into Thursday's session triggered a spike in crude futures prices as traders scrambled in the final minutes to cover open sales positions for the March contract ahead of its expiration Friday.
Analysts reported a sharp rise in prices during the final moments of that shortened session as traders ignored a seemingly bearish report of a build in US crude inventories issued only an hour earlier by the US Energy Information Administration. That weekly report was delayed by 1 day because of the US holiday Monday, Presidents' Day.
EIA reported commercial US crude inventories jumped by 4.9 million bbl to 273.8 million bbl during the week ended Feb. 13, due largely to a big increase in imports (OGJ Online, Feb. 19, 2004). US gasoline stocks increased by 600,000 bbl last week to 205 million bbl, while distillate fuel inventories fell by 5.8 million bbl to 112.5 million bbl during the same period.
The American Petroleum Institute subsequently reported US crude stocks increased by 4.7 million bbl to 274.5 million bbl during the week ended Feb. 13. However, API said US gasoline inventories plummeted by 1.7 million bbl to 202.2 million bbl, while distillate stocks were down by 4.7 million bbl to 119.3 million bbl.
'Bullish' data
Paul Horsnell, head of energy research, Barclays Capital Inc., London, sees bull tracks among EIA's latest weekly data. Based on that report, he said, "The weekly level of implied oil demand has exceeded 21 million b/d for only the third time ever and has now exceeded 20 million b/d for 5 straight weeks."
The last two times US demand exceeded 21 million b/d were "the last week of 2000 and the first week of 2001," Horsnell said Thursday. "Distillate demand for February to date is running at 4.65 million b/d, which is the highest level since the second oil shock in 1979. Gasoline demand is running 183,000 b/d higher than last year, and the overall level of US oil demand is 386,000 b/d higher than last year," he said.
"Such rampant oil demand makes the inventory changes a lesser concern, but they are not quite as price supportive as those we have seen in recent weeks," Horsnell said.
Still, he said, US heating oil inventories are "falling faster than normal" and are likely to end the winter "well below" the 5-year average end-of-season minimum of 40.9 million bbl.
Meanwhile, he said, "Gasoline inventories are struggling to build, even with production running far ahead of last year because refinery maintenance programs are yet to take any major bite out of total capacity utilization."
Although crude inventories increased this past week, Horsnell noted that most of that gain�2.8 million bbl�was on the largely independent West Coast. "In the region where it counts [east of the Rockies], inventories rose by a more modest 1.9 million bbl, and they continued to fall in the Midwest," he said.
Energy prices
The March contract for benchmark light, sweet crudes gained 55¢ to $36/bbl Thursday on NYMEX, while the April position advanced by 16¢ to $34.64/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 58¢ to $36.03/bbl.
Heating oil for March delivery lost 0.9¢ to 92.44¢/gal on NYMEX, but gasoline for the same month gained 0.71¢ to $1.0569/gal.
The March natural gas contract lost 12.1¢ to $5.24/Mcf Thursday on NYMEX, "pressured by a softer cash [spot] market, milder weather forecasts, and a slightly bearish weekly storage report," said analysts Friday at Enerfax Daily. EIA reported early Thursday that 172 bcf of natural gas were withdrawn from underground storage during the week ended Feb. 13 (OGJ Online, Feb. 19, 2004).
"The EIA draw number was under expectations, and the market sold off, but longer-term it was supportive," said Enerfax analysts. "Storage now is likely to drop below 1 tcf by April, and if so, prices will be well supported for the rest of the year."
In London, the April contract for North Sea Brent oil lost 17¢ to $30.82/bbl on the International Petroleum Exchange. Brokers said prices were likely to drift lower Friday in that market. Gas oil for March delivery dipped by 75¢ to $260.50/tonne. The March natural gas contract lost 1.7¢ to the equivalent of $4.19/Mcf on IPE.
The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes slipped by 8¢ to $30.44/bbl Thursday.
"The value of the OPEC basket has been above the $22-28 target range for 108 trading days over the past 8 months," Horsnell noted. "Over the same period, the value of the OPEC basket in euros has stayed within a 22-28 euros band on all [but] just 2 trading days, and on those 2 days it was below the band."
He said, "This is of course just a rather bizarre statistical coincidence. It certainly does not imply that the target band has been secretly switched into euros or that the dollar has lot its primacy in the oil market."
Contact Sam Fletcher at [email protected]
