MARKET WATCH: WTI-Brent spread at 18-month low with marginal price advances
Crude prices advanced marginally in mixed energy markets June 25 with the West Texas Intermediate-North Sea Brent spread dropping to an 18-month low of $5.94/bbl. Natural gas prices continued to fall.
“Energy traders essentially shrugged off President Barack Obama's ‘War on Carbon’ yesterday, which is not too surprising given that his speech earned lots of enthusiasm points but was a little light on impactful policy changes, carbon regulation of power plants notwithstanding,” said analysts in the Houston office of Raymond James & Associates Inc. “Instead, traders focused on US durable goods orders, which ratcheted up 3.2% in May, surpassing analyst expectations and signaling a hunky-dory domestic economy.”
They reported, “Equities jumped on the healthy economy bandwagon, with the Standard & Poor’s 500 Index advancing 1%.” The SIG Oil Exploration & Production Index rose 2.1% while the Oil Service Index increased 1.3%.
Raymond James analysts dismissed Obama's climate policy as a “piecemeal plan that reflects legislative gridlock . . . consisting purely of incremental regulatory steps that do not require congressional action. In other words, no carbon tax, no cap-and-trade, and no renewable portfolio standard at the federal level.”
The “more actionable” provisions include carbon regulation of power plants, more renewables on federal lands, loan guarantees for cleaner fossil fuels, and boosting fuel economy standards. “The rest of the two dozen or so provisions are either too minor to matter or are simply restatements of existing policies,” they said.
US inventories
The Energy Information Administration said June 26 commercial US crude inventories remained unchanged at 394.1 million bbl in the week ended June 21, still above average for the time of year. Gasoline inventories climbed 3.7 million bbl to 225.4 million bbl in the same period, well above average. Blending components increased last week while finished gasoline inventories were unchanged. Distillate fuel inventories increased 1.6 million bbl to 123.2 million bbl.
Imports of crude into the US dropped 138,000 b/d to 8.3 million b/d last week. In the 4 weeks through June 21, crude imports have averaged 8 million b/d, down 1.2 million b/d from the comparable period a year ago. Gasoline imports last week averaged 937,000 b/d while distillate fuel imports averaged 92,000 b/d.
The input of crude into US refineries increased by 173,000 b/d to 15.7 million b/d with units operating at 90.2% of capacity last week. Gasoline production increased to 9.1 million b/d, and distillate fuel production increased to 4.9 million b/d.
Energy prices
The August contract for benchmark US light, sweet crudes increased 14¢ to $95.32/bbl June 25 on the New York Mercantile Exchange. The September contract advanced 17¢ to $95.21/bbl. On the US spot market, WTI at Cushing, Okla., kept in step with the front-month crude futures contract, up 14¢ to $95.32/bbl.
Heating oil for July delivery inched up 0.37¢ to $2.86/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dipped 0.02¢ but closed essentially unchanged at a rounded $2.74/gal.
The July natural gas contract dropped 9.2¢ to $3.65/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 5.5¢ to $3.77/MMbtu.
In London, the August IPE contract for Brent was up 10¢ to $101.26/bbl. Gas oil for July escalated $14.75 to $871.50/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes climbed $1.40 to $99.79/bbl.
Contact Sam Fletcher at [email protected]
Sam Fletcher | Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.
